Bike prices declined more than expected, and sales guidance for the fourth quarter fell short of expectations. NIO's revenue for the 3rd quarter of 2024 was 18.7 billion yuan (RMB, same below), -2.1%/+7.0% YoY, slightly lower than expected.

Bike prices continued to fall to 0.27 million yuan month-on-month, lower than market expectations and previous revenue guidelines. The unit price for the 3rd quarter was 0.28 million yuan, reflecting the increased promotion of the NIO brand in the 3rd quarter. The gross profit margin was 10.7%, slightly exceeding market expectations. Among them, the gross profit margin of automobiles was 13.1%, an improvement of 0.9 percentage points over the previous month. We believe that the improvement in automobile gross margin was mainly due to the scale effect brought about by falling battery costs and rising sales. Sales/R&D expenses were +9.4%/+3.1% month-on-month. R&D expenses were generally within management guidelines, while Ledao's channel expansion and launch increased sales expenses higher than expected, exceeding 4 billion yuan for the first time. We expect sales expenses to increase month-on-month in the fourth quarter due to channel expansion and promotion of Ledao. Net loss for the 3rd quarter/ adjusted net loss of 5.01 billion/4.41 billion yuan, which is basically the same as the 2nd quarter.

NIO expects delivery of 0.072 million to 0.075 million vehicles in the fourth quarter, up 43.9% to 49.9% year on year; revenue guidance for the fourth quarter is 19.68 billion to 20.38 billion yuan, up 15.0% to 19.2% year on year. The sales guidelines were slightly lower than expected, meaning that the average delivery in November and December was about 0.026-0.027 million vehicles, while the NIO brand delivered about 0.018-0.019 million vehicles.

Next year's sales increase will come from Ledao, and Firefly will be released next month. Next year, the NIO brand will switch to the new generation (NT3) platform one after another. The first product is ET9, and new products will be upgraded; next year, in addition to the L60, the Ledao brand will also launch two domestic SUVs, a medium to large 6-7 seater SUV, and a large 5-seater SUV, which should boost sales; while the lower-priced sub-brand Firefly will deliver the first product. Currently, the Ledao L60 is at a normal climbing pace. Management guides 0.01 million vehicles in December and 0.02 million vehicles in March next year. According to the channel, the L60 order volume is up to 0.05 million. Next year's sales growth will mainly come from Ledao, which is the ideal L7 and L8 for 6-7-seater SUVs and 5-seater SUVs. According to management guidelines, the gross profit margin of 15% or more will be maintained after increasing the amount.

Keep buying. We maintain our buy rating and maintain our target price of HK$59.88/$7.7 (Nious). The current price corresponds to our sales forecast 0.7 times the 2025 market sales rate, which is lower than Xiaopeng/Ideal 1.2 times/0.9 times, which partially reflects the fundamental loss. Next year, the Ledao L60 will be delivered in volume, a month-on-month increase in sales, and an improvement in automobile gross margin will support a rebound in stock prices.