Deliveries increased, and Q2 guidance was strong. The company delivered 30053 vehicles in 2024Q1, -3% year-on-year, with revenue of 99.09 billion yuan, or -7.2% year-on-year. Q1 gross profit was 4.9%, and the gross profit margin for automobiles was 9.2%, a month-on-month decline, mainly due to a decrease in ASP due to increased discounts during product changeover, which was partially offset by lower BOM costs.
Q1 Non-GAAP net profit was -4.9 billion, and the non-GAAP net profit margin was -49.4%. Thanks to various factors such as 1) product changeover, 2) BaaS plan adjustment, 3) sales network expansion, and 4) increase in power exchange stations, the company's sales volume was strong in April-May. The company's Q2 guidance sales volume was 54,000-56,000, up 130%-138% year on year; guidance revenue was 165.87-17.135 billion yuan, up 89%-95% year on year.
Orders are strong and supply is in short supply. 1) Car purchase policy adjustment: The company adjusted its BaaS plan in March of this year. Not only did it directly or indirectly reduce rents, but consumers can also deduct buyout costs for part of the rent when “rent-to-buy”. In addition, users who buy cars in May also get various benefits such as “Pay 4 and get 1 free” monthly rent and 60 vouchers. According to the company's performance report, the current BaaS program penetration rate is 80%, driving the company's sales growth.
2) Order side: The company stated at the Q1 public results meeting that the number of orders exceeded expectations, the delivery volume in May (20,544 vehicles) almost reached the upper limit of monthly production capacity, and order demand exceeded production capacity during the May-June period. In order to guarantee delivery, the company now hopes to increase production capacity by starting part of a double shift.
The Ledao L60 will be delivered soon, and the product matrix will continue to be completed in the future. 1) Ledao brand: The company Ledao L60 was unveiled in May 2024 and is expected to be officially released and delivered in September. At that time, the company will prepare about 100 Ledao stores to support product sales. In addition, the company expects to launch a medium to large SUV next year, which indicates that the long-term gross margin of the Ledao brand will be above 15%. 2) Firefly brand: Positioned as a boutique car, which is expected to be officially delivered on 2025H1. The brand is expected to share a sales network with the NIO brand. 3) NIO brand: We expect ET9 to be officially launched and delivered in 2025Q1. Additionally, the NIO brand will gradually switch to the NIO 3.0 platform in 2025. As a result, by 2025H1, the company's three major brand products went hand in hand, with the NIO, Ledao, and Firefly brands covering products with a price range of more than 300,000, 20-30 thousand, and 100,000 to 200,000, respectively.
The fourth generation station has begun to be launched, and electricity exchange is actively open for cooperation. As of June 13, NIO has 2,432 power exchange stations and 22,633 charging stations around the world. Since November 2023, NIO has actively established power exchange cooperation with other brands. Up to now, the company has established cooperative relationships with companies such as Changan, Geely, Jiangqi, Chery, Lotus, Guangzhou Automobile, and FAW. The company plans to convert some third-generation stations into fourth-generation stations and build new fourth-generation stations. The goal is to form more than 1,000 four-generation stations by the end of the year, which can be used by Ledo and other partner models. On May 31, NIO Energy received a strategic investment of 1.5 billion yuan. After completing this round of financing, NIO Energy still owns about 90% of NIO Energy's shares. We expect that NIO Energy may accept more investment in the future.
Investment advice: Considering the profit pressure under the price war, we have lowered our profit forecast appropriately. We expect the company to sell about 21/334/440,000 vehicles in 2024-2026, with total revenue reaching 634/880/114.4 billion yuan, and a non-GAAP net profit margin of about -30%/-18%/-13%. We gave it a target market value of approximately US$13.1 billion (HK$102.4 billion), corresponding to approximately 1.5X 2024e P/S, which is approximately HK$49 for Hong Kong stocks (9866.HK) and US$6.3 for US stocks (NIO.N), maintaining a “buy” rating.
Risk warning: risk of model development and sales falling short of expectations, risk of new brand promotion falling short of expectations, risk of free cash flow being slower than expected, risk of fluctuations in upstream parts supply.