1Q24 results are in line with market expectations
The company announced 1Q24 results: achieved revenue of 9.91 billion yuan, and the gross margin of the automobile business decreased slightly month-on-month due to increased depreciation and amortization and promotions; non-GAAP net loss was 4.90 billion yuan, which was basically flat month-on-month, hedging cost reduction and good cost control, and the performance was in line with market expectations.
Development trends
1Q gross margin performance was steady, and cost control was good. The company delivered 30,053 vehicles in 1Q24, or -39.9% month-on-month, mainly affected by the seasonal Chinese New Year season in China. The gross margin of 1Q automobile sales was 9.2%, -2.7ppt month-on-month. The month-on-month decline was mainly due to partial depreciation and amortization pressure brought about by the facelift and upgrade of 2024 models. In addition, ASP declined due to increased promotion of older models during the product transition period, but this was partly offset by vehicle cost reduction; gross margin of other businesses was -18.4%, +2.6/15.2ppt, respectively, and increased efficiency of charging and switching operations led to loss reduction. On the cost side, 1Q R&D expenses were 2.86 billion yuan, -27.9% month-on-month; marketing and management expenses were 3 billion yuan, -24.6% month-on-month. The company continued to optimize the organizational structure and improve operational efficiency.
The non-GAAP net loss was 4.90 billion yuan, which was basically the same from month to month. Overall, 1Q operations were resilient.
Sales continued to improve, and 2Q sales guidance was steady. Recently, the company's operating efficiency has continued to improve, with deliveries exceeding 20,000 vehicles in May; looking ahead to 2Q, the company's sales volume is 55,000-56,000 units, corresponding to June deliveries still close to 20,000 units. Orders are improving and production capacity is gradually catching up. Looking back, the company has greatly increased the competitiveness of models by switching to 2024 models. The adjustment of the BaaS operation strategy, reducing rents and introducing promotional policies has attracted more orders. On the other hand, the company's strategy to increase sales capacity since 2023 has also been accompanied by an expansion in the number of sales stores and sales staff, which has effectively boosted sales. In terms of power exchange, the number of the company's power exchange stations continues to increase, improving consumers' electricity exchange experience. Looking ahead, the company plans and sales policies are more flexible, providing more sales resources to promote high-margin models, and gaining more market share on the basis of achieving a steady double-digit gross margin in the automobile business.
Baas's business model is more clear, and the multi-brand strategic layout is complete. We believe that with battery life cycle management, the company can reduce technology, operation and maintenance costs, and support diversified pricing strategies without affecting profits. On May 31, NIO Energy, a subsidiary of the company, received a strategic investment of 1.5 billion yuan from the Wuhan Guangchuang Fund, and the charging and switching business was once again recognized by the market. We expect to optimize the charging and switching layout in terms of strategic investment, capital expenditure, and model sharing. The company officially released the Ledao brand and entered the mainstream household user market. The pre-sale price of the first SUV Ledao L60 reflected a high quality price ratio; during this performance conference, the company guided the official launch of the 1H25 Firefly brand model, positioned the boutique car category, differentiated layout of the three categories, and shared resources such as R&D and power exchange. We expect to drive the company's sales to grow more rapidly.
Profit forecasting and valuation
The current US and Hong Kong stock prices correspond to 1.0x EV/REV in 2024, maintaining 2024/25 non-GAAP net profit and maintaining the performance of the industry. Maintaining the target price of HK$62 /$8 for Hong Kong and US stocks, all corresponding to 1.4x EV/REV in 2024. Hong Kong stocks and US stocks have 50.5%/51.8% 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.