Performance review
4Q23 results fall short of market expectations
The company announced 4Q23 results: achieved revenue of 17.10 billion yuan and non-GAAP net loss of 4.80 billion yuan, an increase over the previous month. The 4Q results were mainly due to the expansion of expenses to the expansion of losses, and the results fell short of market expectations.
Development trends
Automobile gross margins have improved, and cash on hand has increased. 4Q automobile gross profit margin was 11.9%, +0.9ppt month-on-month, and cost reduction progressed; on the cost side, R&D expenses were 3.97 billion yuan, +30.7% month-on-month; marketing and management expenses were 3.97 billion yuan, +10.1% month-on-month, which slightly exceeded market expectations, until non-GAAP net loss increased to 4.80 billion yuan month-on-month. Of this, interest and investment income was $1.37 billion, mainly due to the conversion of unrealized income from sellable debt investments to investment income of $980 million from other comprehensive income. In terms of cash, in December '23, the company completed a $2.2 billion strategic equity investment from the Abu Dhabi investment agency CYVN, which further increased cash receipts, bringing a margin of safety. Looking ahead to 1Q24, the company expects delivery volume of 31-33,000 vehicles, corresponding to a recovery of around 14,000 vehicles in March.
Strategic cooperation agreements have been continuously signed, and the differentiated value of the energy supplementation system has been recognized. The company has the largest infrastructure for power exchange stations in China, and has the advantage of network effects. In the long run, the charging/switching layout pattern is expected to move towards a model where leading companies open their own networks and obtain incremental revenue. The company has more than 1,600 patents related to power exchange, built and operated more than 2,350 power exchange stations, and provided more than 32 million power exchange services. The company's power exchange business has accumulated rich experience in R&D, construction and operation, and has a first-mover advantage. Recently, the company has continuously signed strategic cooperation agreements with a number of car companies in the electricity exchange business. Through external cooperation, we believe that the company can share the heavy investment and operational pressure of electricity exchange, drive improved operating efficiency, and improve financial performance. Looking ahead to 2024, the company plans to continue to build more than 1,000 power exchange stations.
Product modernization progressed steadily, and the Alps brand was released in 2Q. On the product side, following the release of the company's flagship model ET9 on NIO Day, the 2024 facelift version of the company's existing model is scheduled to be officially delivered in early March, and NIO has consolidated its brand and price positioning. Furthermore, the company plans to officially launch the Alps brand in 2Q24 and enter the mass market. Specifically, Alps is positioned as a home market, and testing of the first model is progressing smoothly. The company expects it to be about 10% lower than Tesla Model Y products in terms of cost control, and the product competitiveness is expected to be excellent. Furthermore, Alps is expected to launch more models such as SUVs in the future, and we expect the company to enter a new growth path driven by the Alps.
Profit forecasting and valuation
The current US stock and Hong Kong stock prices correspond to 0.7x EV/Rev in 2024. Considering industry competition and mass production in the Alps, the 2024 non-profit deduction was lowered to -14.8 billion yuan (previous value was -12.9 billion yuan), and the newly introduced 2025 non-profit deduction was -9.8 billion yuan. Considering the intensification of competition in the sector, the target price of Hong Kong and US stocks was lowered by 24%/24% to HK$62 HKD/8 US dollars, respectively, corresponding to 1x EV/reV in 2024. Hong Kong stocks and US stocks have 46%/50% upside compared to current stock prices, respectively.
risks
Demand fell short of expectations due to increased competition in the market, and cost control and power exchange cooperation fell short of expectations.