2Q24 results slightly exceeded market expectations

The company announced 2Q24 results: revenue of 17.45 billion yuan. Driven by the reduction in supply chain costs and the gradual clearance of old model inventories, the gross margin of the automobile business increased to 12.2% month-on-month, and the non-GAAP net loss was 4.54 billion yuan. Losses narrowed year-on-month, and the performance slightly exceeded market expectations due to improvements in gross margin and operating efficiency.

Development trends

Sales volume and gross profit continued to improve, and losses in other businesses were effectively reduced. The company delivered a total of 57,373 vehicles in 2Q, the highest level of delivery in history, and occupied more than 40% of the market share in the domestic pure electric vehicle market with a price of more than 0.3 million yuan; corresponding 2Q revenue was 17.45 billion yuan, +98.9%/+76.1% month-on-month, respectively. Driven by supply chain cost reduction and the gradual clearance of old model inventories, the gross margin of the automobile business increased to 12.2%; in 2Q, the gross margin of other businesses was -12.3%, and losses all narrowed sharply from month to month, mainly due to the increase in the company's holdings and adjustments in power exchange rights, which led to an increase in the profitability of the after-sales business. The company expects that the delivery of Ledao models will continue to improve the gross margin of other businesses. On the cost side, 2Q R&D and marketing management costs were 3.22/3.76 billion yuan, respectively, +12.4%/25.4% month-on-month.

As of September 1, the company had a cumulative layout of more than 105 ONVO brand stores. According to the company's performance meeting, the investment in a single Ledao brand store was significantly lower than NIO, and the renovation cost of a single store was less than one million yuan. On the net profit side, non-GAAP net loss was 4.54 billion yuan. Losses all narrowed month-on-month, and performance slightly exceeded market expectations.

The Ledao model is about to be launched, and the growth momentum and path are clear. The company guided the 3Q delivery of 0.061-0.063 million vehicles, which is expected to break through the quarterly delivery record once again. In terms of new models, the company plans to officially launch the Ledao L60 on September 19. Currently, pre-sale orders have exceeded the company's expectations. We expect the Ledao L60 to become a new growth engine for the company, driving another improvement in overall operating efficiency. In addition, NIO ET9 and Firefly brand models are scheduled to be delivered one after another in 2025, all of which are expected to contribute more to the company. Overall, although the domestic passenger car market is fiercely competitive, the company has maintained a leading share in the high-end pure electric market.

In this performance meeting, the company clearly guided its future growth strategy: 1) expand the price range, with the sales price of the vehicle including batteries, and the plan covers the price range from 0.14 million to 0.8 million yuan, corresponding to the price range of vehicles without batteries included in 0.1 million-0.7 million yuan; 2) Realize the layout of various models such as sedans and SUVs; 3) expand the sales area. Currently, NIO main brand models are mainly sold in Tier 1 and 2 cities, along with stores gradually covering third- and fourth-tier cities, and overall charging and switching The increase in the number of networks is expected to boost sales. For overseas markets, the company plans to continue to focus on regions such as Europe and the Middle East, and drive continuous growth overseas through in-depth cooperation with local dealers and the launch of new products in 2025.

Profit forecasting and valuation

The current US and Hong Kong stock prices correspond to 0.8x EV/REV in 2024, maintaining 2024/25 non-GAAP net profit and maintaining an outperforming industry rating. Considering the correction in sector valuations and increased market competition, the target price of Hong Kong and US stocks was lowered by 19%/19% to HKD/6.5 US dollars, respectively, corresponding to 1.2x EV/REV in 2024. Hong Kong stocks and US stocks have 47%/34% upward space 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.