[China ] Autos May 20, 2021
NIO Buy (NIO US ) (Initiate )
Taking on Tesla with battery subscription model TP: US$51.0 Upside: 52.4%
Mirae Asset Securities Co., Ltd. Yongdai Park [email protected]
Recommendation Initiate coverage with Buy rating and TP of US$51 ó We derived our target price for NIO by applying an EV/sales ratio of 7.6x (Tesla’s average multiple during 2014-16). ó In our view, NIO is well-positioned to benefit from China’s growing electric vehicle (EV) market. That said, we do not see any significant share price momentum through 3Q21. ó Monthly sales volume expectations have been lowered (to around 7,000-7,500 units) as a result of the ongoing semiconductor shortage. ó For 2Q21, we look for revenue of CNY8.1-8.5bn (+2.1-6.5% QoQ) and sales volume of 21,000-22,000 units (+5-10% QoQ). ó We see potential for a rebound from 4Q21, spurred by: 1) the likely improvement in the global chip supply situation from 3Q21; 2) announcements related to the autonomous driving capabilities of the ET7, which will begin deliveries in 1Q22; and 3) capacity ramp-up plans for existing models.
Investment points Position in China ’s BEV market to strengthen ó We forecast NIO’s sales volume to grow 49% annually through 2025 and its market share to reach 7.6% in 2025 (vs. 4.4% in 2020). ó We believe NIO is well-positioned as a luxury battery EV (BEV) maker over the long run, amid : 1) the accelerating transition to new energy vehicles (NEVs); and 2) China’s favorable social dynamics, such as increasing demand for luxury goods. ó The company will enter the electric sedan market with the launch of the ET7. Product portfolio expansion will likely help diversify the company’s revenue base. ó NIO has improved the EV customer experience by providing differentiated charging convenience and a Battery-as-a-Service (BaaS) subscription program.
1Q21 review Revenue beats guidance ó In 1Q21, NIO recorded revenue of CNY7.98bn (+482% YoY, +20% QoQ) and sold 20,000 vehicles (+423% YoY, +16% QoQ). ó Net loss widened to CNY4.88bn, but this was mainly the result of a buyback from strategic investors (3.305% of shares; CNY4.4bn). Adjusting for this, net loss was around CNY0.35bn (-79% YoY). ó Vehicle gross margin reached 21% (+29%p YoY, +4%p QoQ), a quarterly record, driven by ASP gains resulting from an increase in buyers opting for the NIO Pilot advanced driver assistance system (ADAS) and 100kWh battery pack.
Risks ó 1) Production disruptions due to the global chip shortage; and 2) price cuts by Tesla
Key data
1200 NIO US SPX INDEX Current price (5/19/21, US$) 33.46 Market cap (US$bn) 54.8 1000 Exchange NYSE Market cap (Wtr) 62.02 800 EPS growth (21F, %) - Shares outstanding (mn) 1,361.7 600
400 P/E (21F, x) - 52-week low (US$) 3.18
200 Market P/E (21F, x) 22.3 52-week high (US$) 66.99 0 Dividend yield (%) - 19.1 19.7 20.1 20.7 21.1
Share performance Earnings and valuation metrics (%) 1M 6M 12M FY (Dec.) 2018 2019 2020 2021F 2022F 2023F Absolute -9.0 -30.9 806.8 Revenue (CNYmn) 4,951 7,825 16,258 34,761 54,700 80,311 Relative -8.0 -39.9 544.0 OP (CNYmn) -9,596 -11,079 -4,608 -1,790 -1,492 2,553
OP margin (%) -193.8 -141.6 -28.3 -5.1 -2.7 3.2 NP (CNYmn) -23,328 -11,413 -5,611 -7,072 -1,787 1,915 EPS (CNY) -22.74 -11.08 -4.74 -5.19 -1.31 1.41 ROE (%) -287.7 -685.8 -41.5 -23.5 -6.0 5.5 P/E (x) n/a n/a n/a n/a n/a 153.0 P/B (x) 1.2 n/a 2.3 10.4 9.5 7.6 Source: Company data, Mirae Asset Securities Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. May 20, 2021 NIO
I. Investment points
1. Favorable market positioning
NIO has established itself as a luxury pure battery electric vehicle (BEV) brand in China. The company’s vehicles sell for CNY350,000-460,000, or CNY270,000-380,000 with a BaaS subscription plan. Notably, they do not lag behind other BEVs when it comes to specifications
We believe NIO is well-positioned, amid: 1) the accelerating transition to NEVs; and 2) shifts taking place in China that are continuing to fuel demand for luxury goods. We forecast NIO’s sales volume to grow 49% annually through 2025 and its market share to reach 7.6% in 2025 (vs. 4.4% in 2020).
Figure 1. Avg. price of EV models sold in China
(CNY'000)
1,000 Luxury High-end Economy 800
600
400
200
0 NIO BYD GAC Tesla (Aion) Chery XPeng Li Auto Benz (Ora) Geely Mercedes- Great Wall Great (Geometry) Weltmeister (Baojun) BAIC (BJEV) SAIC-GM-Wuling
Source: Company data, Mirae Asset Securities Research
Table 1. NIO: Price overview (CNY) ES8 (full-size SUV) ES6 (midsize SUV) EC6 (coupe SUV)
MSRP 468,000 358,000 368,000 Price after subsidies 450,000 343,600 350,000 Price after subsidies and BaaS subscription 380,000 273,600 280,000 Discount from BaaS subscription 15% 20% 19% Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 2 May 20, 2021 NIO
Table 2. Key EV models: Spec comparison
ES8 ES6 EC6 ET7 G3 P7 ONE Model 3 Model Y BEV BEV PHEV BEV Type Mi dsize SUV Midsize SUV Sedan Compact SUV Midsize sedan SUV Midsize SUV sedan 468,000 - 358 ,000 - 368 ,000 - 448 ,000 - 150 ,000 - 230 ,000 - 348 ,000 - MSRP (CNY) 328,000 266,000 558 ,000 468 ,000 468 ,000 526 ,000 200 ,000 * 367 ,000 * 378 ,000 First delivery Mar. 2019 Jun. 2019 Sep. 2020 1Q22F Dec. 2018 May 2020 Nov. 2019 Jan. 2020 Jan. 2021 Doors 5 5 3 4 5 4 5 4 5 Seats 6/7 5 5 5 6/7 5 Length 5,022mm 4,850mm 5,098mm 4,450mm 4,880mm 5,020mm 4,694mm 4,750mm Wheelbase 3,010mm 2,900mm 3,060mm 2,625mm 2,998mm 2,935mm 2,875mm 2,890mm Curb weight 2,425kg 2,345kg n/a 1,609 ~ 1,657kg 1,865 ~ 1,935kg 2,300kg 1,745kg 1,997kg Engine N/A N/A 1.2L turbo N/A 180kW perm. 137kW Rear 202kW 160kW perm. magnet magnet + Front 145kW Rear 196kW 100kW + 140kW induction Motor perm. + 240kW induction 300kW perm. magnet perm. magnet perm. magnet +180kW perm. magnet induction magnet 0-100km 4.9 4.7/5.6 4.5/5.4 3.9 8.6 4.3/6.7 6.5 5.6 5.1 acceleration (s) Battery capacity 70/100/ 150 58/67 60/71/81 40 55 77 (kWh) Energy density 135 for 70kWh/185 for 100kWh/360 for 150kWh SS 180 170 Around 180 260 (Wh/kg) NEDC range 420/430/ 430/440/ 480/586/ 415/580 500/700/ 1000 460/520 800 468 594 (km) 600/610 605/615 670/706 Autonomous L3 L3+ L3 L2 L3 driving Map provider in NavInfo/Baidu AutoNav AutoNav Baidu China LiDAR x x x o x x x x x Processor Mobileye EyeQ4 Nvidia Orin x4 Nvidia Xavier Mobileye EyeQ4 Tesla HW 3.0 Processing 2.5 1,016 30 2.5 144 speed (TOPs) Notes: A new NIO model featuring a 150kWh solid-state battery (with a 1,000km range) is in development; price after subsidies for the G3 and P7 Source: Company data, Mirae Asset Securities Research
Table 3. Comparison of key EV makers
Tesla NIO XPeng Li Auto BYD Geely Voice interaction ● ● ● ● ● ● Over-the-air upgrades ● ● ● ● ● ● Digital Semi-autonomous navigation ● ● ● x x ● LiDAR x ● x x x x Self-owned manufacturing ● x x ● ● ● Direct sales model ● ● ● ● x x Self-sufficiency In-house batteries In progress x x x ● x In-house motors ● ● x x ● ● In-house autonomous SoCs ● x x x x x Battery swapping technology x ● x x x ● Ecosystem Battery leasing x ● ● x ● ● Public charging stations ● ● ● x ● ● Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 3 May 20, 2021 NIO
Accelerating transition to NEVs : We expect China’s NEV (passenger car) sales volume to increase 30% annually through 2025. In particular, we believe BEVs (NIO’s business area) will drive overall growth. We forecast BEV sales volume to expand to 4.2mn units in 2025, up from 1mn units in 2020.
Table 4. China: Passenger NEV sales volume forecasts 2020 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F Sales volume (10,000 units) Total passenger vehicles 2,018 2,169 2,213 2,257 2,302 2,348 2,395 2,443 2,492 2,541 2,592 NEVs 125 170 221 293 368 470 575 684 797 915 1,037 BEVs 100 142 189 256 325 420 520 624 731 842 957 NIO 4 9 14 19 25 32 40 48 57 66 76 PHEVs 25 28 33 38 43 50 55 60 66 73 80
YoY growth Total passenger vehicles -6.0% 7.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% NEVs 14.6% 36.3% 30.1% 32.6% 25.5% 27.5% 22.4% 19.0% 16.6% 14.8% 13.3% BEVs 16.1% 41.6% 33.2% 35.6% 27.1% 29.2% 23.9% 19.9% 17.2% 15.2% 13.6% NIO 117.1% 105.8% 50.0% 40.0% 30.0% 30.0% 25.0% 20.0% 20.0% 15.0% 15.0% PHEVs 9.1% 15.0% 15.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0%
% of total sales volume NEVs 6.2% 7.8% 10.0% 13.0% 16.0% 20.0% 24.0% 28.0% 32.0% 36.0% 40.0% BEVs 5.0% 6.5% 8.5% 11.3% 14.1% 17.9% 21.7% 25.5% 29.3% 33.1% 36.9% PHEVs 1.2% 1.3% 1.5% 1.7% 1.9% 2.1% 2.3% 2.5% 2.7% 2.9% 3.1%
NIO’s M/S (% of BEVs) 4.4% 6.4% 7.2% 7.4% 7.6% 7.6% 7.7% 7.7% 7.9% 7.8% 7.9% 1) Total passenger vehicle sales volume grows 2% annually through 2030 ( exception: +7.5% in 2021 ). 2) NEVs account for 20% of total passenger vehicle sales volume in 2025 and 40% in 2030. Key assumptions 3) The percentage of BEVs out of NEVs increases, while the percentage of PHEVs decreases. 4) NIO’s sales volume growth outpaces total BEV sales volume growth throu gh 2030. Source: MarkLines , Mirae Asset Securities Research
Figure 3. Sales volume growth (YoY) forecasts: Total BEVs Figure 2. NIO: Annual sales volume and M/S forecasts (passenger cars) vs. NIO
('000 units) 350 10% 140% NIO Total BEV Sales volume (L)
300 M/S (R) 120% 8% 250 7.6% 100% 6% 200 80%
150 4.4% 60% 4%
100 40% 2% 50 20%
0 0% 0% 2019 2020 2021F 2022F 2023F 2024F 2025F 2020 2021F 2022F 2023F 2024F 2025F
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 4 May 20, 2021 NIO
Increasing demand for luxury goods : Demand for luxury goods is continuing to rise in line with the growing affluence of Chinese consumers. Within the BEV market, we believe the appetite for luxury cars will gradually increase.
Competition is fierce in the low/mid-end BEV segment, where there are already a fair number of models. However, consumers have limited options when it comes to luxury vehicles: it is either Tesla or NIO. From this perspective, we believe NIO is well-positioned for growth.
Admittedly, the fact that the company is competing against Tesla—which has recently made a series of price cuts to become more price competitive—has raised some concerns. However, we believe NIO’s main competition is conventional vehicles by European brands (BMW, Mercedes-Benz, Audi, etc.). In our view, there is more than enough room for both NIO and Tesla to grow in the rapidly expanding BEV market. NIO moved into the market earlier than European luxury automakers and has secured a firm market foothold. The fact that the company is a local brand is another key advantage that cannot be ignored.
Figure 4. China: Household disposable income Figure 5. China: Luxury vehicle sales volume and penetration
(CNY) ('000 units) 50,000 Urban Rural 3,000 Luxury sales volume (L) 16% 43,834 Market penetration (R) 14% 2,500 40,000 12% 2,000 10% 30,000 26,467 1,500 8% 17,131 20,000 6% 1,000 9,430 4% 10,000 500 2%
0 0 0% 2013 2014 2015 2016 2017 2018 2019 2020 2009 2011 2013 2015 2017 2019
Source: National Bureau of Statistics of China, Mirae Asset Securities Research Source: LMC Automotive, Mirae Asset Securities Research
Figure 6. Price range comparison of EV models sold in China
Tesla Model X NIO ES8 NIO ET7 NIO EC6 NIO ES6 Tesla Model Y Tesla Model 3 XPeng P7 BYD Tang EV Peugeot E-2008 XPeng G3 Geely Emgrand EV500 BYD e2 JAC iEV6E （CNY'000 ） Wuling Hongguang Mini EV 0 200 400 600 800 1,000 1,200
Notes: Light gray bars represent starting prices; dark grey bars represent prices with additional options; NIO’s ET7 is scheduled for release in 1Q22; for Tesla’s Model X, which has not been released yet, price is based on imports. Source: Company data , Mirae Asset Securities Research
Mirae Asset Securities Research 5 May 20, 2021 NIO
2. Sights set on electric sedans
NIO, which initially targeted the BEV market with three SUV models, will enter the larger market of electric sedans next year by releasing the ET7. In 2020, around 1mn BEVs were sold in China, of which roughly 75% (740,000) were sedans. We expect the launch of the ET7 and robust sales of existing SUV models to support revenue growth.
The ET7 is a luxury sedan priced at CNY430,000-500,000 (with subsidies). The price falls to the high-CNY300,000 level when adding the BaaS subscription. Competing models include Tesla’s Model S and XPeng’s P7. The ET7 rivals the Model S in terms of performance while being much more competitively priced. The P7, while more affordable, is a sports sedan rather than a luxury sedan.
Among conventional vehicles, the ET7 competes with the BMW 5 Series, Mercedes-Benz E- Class, and Audi A6L. For potential buyers looking to switch to BEVs, we believe the ET7 could be one of the most compelling options.
Figure 7. ET7 selling price and BaaS subscription fee
Standard Long-range Premier
MSRP (CNY) 448,000 506,000 526,000
Price after subsidies (CNY) 430,000 488,000 508,000
Price after subsidies and BaaS 360,000 360,000 380,000 subscription (CNY) BaaS monthly subscription fee 980 1,480 1,480 CNY)
Battery capacity (kWh) 70 100 100
NEDC range (km) 500 700 700
A new model featuring a 150kWh solid-state battery with a 1,000km driving range will be released in 4Q22
Note: The Chinese government has suspended subsidies for NEVs costing more than CNY300,000, but this does not apply to NEVs with swappable batteries, such as the ET7. Source : Company data , Mirae Asset Securities Research
Table 5. ET7 vs. competing models
Model ET7 Model S P7 E-Class 5 Series A6 Type BEV BEV BEV Conventional Conventional Conventional MSRP (CNY) 430,000-508,000* 734,000 229,900* 498,000-680,000 489,000-697,000 419,800-653,800 Battery capacity (kWh) 70/100/150 100 60/71/81 - - - 0-100km acceleration (s) 3.9 3.8 4.3/6.7 6.1 6.9 6.3 NEDC range (km) 500/700/1000 719 480/586/670/706 - - - Sales volume (2020) - - 15,315 149,900 158,921 178,501 Note: Price after subsidies for the ET7 and P7 Source: Company data, Tesla, Mercedes -Benz China, ChinaAuto Web, Mirae Asset Securities Research
Mirae Asset Securities Research 6 May 20, 2021 NIO
3. Differentiated charging convenience and BaaS program
One of the biggest reasons consumers are reluctant to purchase EVs is the lack of charging infrastructure. Even though driving range has improved, consumers still have many reservations. Against this backdrop, NIO has set itself apart by providing differentiated charging convenience and improving the EV customer experience.
NIO’s vehicles can be charged using: 1) a battery swapping station (where a swap takes just three minutes); 2) a mobile charging unit (100km range per 10-minute charge); or 3) a super charger or public charging station.
In particular, we believe battery swap technology will play a critical role in the company’s competition with Tesla. NIO currently has 177 swapping stations and plans to increase that number to 500 by year-end.
High prices are another factor discouraging EV purchases. Therefore, it is meaningful that NIO’s BaaS program eliminates the battery cost (which makes up the biggest percentage of EV costs) from the purchase price. Instead, buyers pay a monthly battery subscription fee. The service is a win-win for buyers and NIO, as it relieves consumers from concerns over deterioration in battery performance and the burden of battery maintenance while diversifying NIO’s revenue stream beyond vehicle sales.
Figure 8. NIO: Battery swapping station
Source: Company materials, Mirae Asset Securities Research
Figure 9. NIO: Mobile charging unit
Source: Company materials, Mirae Asset Securities Research
Mirae Asset Securities Research 7 May 20, 2021 NIO
II. Earnings and forecasts
Table 6. NIO: Annual earnings and forecasts (CNYmn) 2019 2020 2021F 2022F 2023F 2024F 2025F Revenue 7,825 16,258 34,761 54,700 80,311 109,457 149,134 Vehicle sales 7,367 15,183 32,186 49,727 71,706 96,015 128,564 Other sales 458 1,075 2,575 4,973 8,605 13,442 20,570 COGS (9,024) (14,385) (28,246) (44,257) (64,249) (87,566) (119,307) GP (1,199) 1,873 6,514 10,443 16,062 21,891 29,827 Vehicle sales (729) 1,927 6,437 9,945 14,341 19,203 25,713 Other sales (470) (53) 77 497 1,721 2,688 4,114 Operating expenses (9,880) (6,481) (8,304) (11,934) (13,509) (16,034) (17,330) R&D (4,429) (2,488) (3,476) (5,470) (5,622) (5,473) (4,474) SG&A (5,452) (3,932) (4,828) (6,465) (7,888) (10,562) (12,856) Other operating losses (net) 0 (61) 0 0 0 0 0 EBIT (11,079) (4,608) (1,790) (1,492) 2,553 5,857 12,496 PBT (11,288) (5,298) (2,062) (1,777) 2,253 5,542 12,166 Income tax (8) (6) (10) (10) (338) (831) (1,825) After-tax profit (11,296) (5,304) (2,072) (1,787) 1,915 4,711 10,341 Preferred dividends, distributions, & earnings adj. 0 0 0 0 0 0 0 Minority interests 117 307 5,000 0 0 0 0 NP attributable to owners of the parent (11,413) (5,611) (7,072) (1,787) 1,915 4,711 10,341
Key assumptions/metrics Sales volume (units) 20,139 43,728 90,000 135,000 189,000 245,700 319,410 Net increase 7,332 23,589 46,272 45,000 54,000 56,700 73,710 YoY 57% 117% 106% 50% 40% 30% 30% ASP (CNY) 365,813 347,204 357,620 368,348 379,399 390,781 402,504 YoY -3% -5% 3% 3% 3% 3% 3%
Revenue (YoY) 58% 108% 114% 57% 47% 36% 36% Vehicle sales 52% 106% 112% 55% 44% 34% 34% Other sales 364% 135% 139% 93% 73% 56% 53% GP (YoY) 369% -256% 248% 60% 54% 36% 36% EBIT (YoY) 15% -58% -61% -17% -271% 129% 113% After-tax profit (YoY) 17% -53% -61% -14% -227% 146% 120% NP (YoY) -51% -51% 26% -75% -207% 146% 120%
Gross margin -15% 12% 19% 19% 20% 20% 20% Vehicle sales -10% 13% 20% 20% 20% 20% 20% Other sales -103% -5% 3% 10% 20% 20% 20% COGS/revenue 115% 88% 81% 81% 80% 80% 80% Operating expenses/revenue 126% 40% 24% 22% 17% 15% 12% R&D/revenue 57% 15% 10% 10% 7% 5% 3% SG&A/revenue 74% 26% 15% 13% 11% 11% 10% Other operating losses (net) 0% 6% 0% 0% 0% 0% 0% EBIT margin -142% -28% -5% -3% 3% 5% 8% PBT margin -144% -33% -6% -3% 3% 5% 8% Tax rate 0% 0% 0% 15% 15% 15% 15% Net margin -146% -35% -20% -3% 2% 4% 7% Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 8 May 20, 2021 NIO
III. Share price and valuation
NIO shares rallied sharply over the course of 2020, with Tesla’s strong gains boosting sentiment. Positive headlines, such as China’s EV subsidies/incentives and NIO’s growing sales, added further fuel to the rally. As a result, valuation reached lofty levels
While we do not see any significant momentum in the near term, several factors point to a potential rebound from 4Q21. First, as the chip shortage begins to ease (likely from 3Q21), sales volume growth could accelerate. Monthly sales volume expectations have come down to 7,000-7,500 units, but should pick up to 9,000-10,000 units in 4Q21
Second, with the ET7 set to come out in 1Q22, we expect NIO to hold a launch event at the end of the year. If the company reveals more details about the model’s autonomous driving capabilities (which it did not do at its NIO Day event earlier this year), this could serve as a positive share price catalyst. Lastly, the company could potentially announce capacity ramp- ups for existing models.
Figure 10. NIO: Share price trend Figure 11. Tesla vs. NIO: EV/sales ratio
(US$) (x) 70 30 Tesla NIO 28
60 25 50 21 21 20 40 15 15 30 10 9 10 8.9 8.1 8 20 5.6 5 5 10 5 3 3
0 0 9/18 3/19 9/19 3/20 9/20 3/21 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Bloomberg, Mirae Asset Securities Research Source: Refinitiv, Mirae Asset Securities Research
Figure 12. NIO: Sales volume trend by model
(Units) 10,000 ES8 ES6 EC6
8,000
6,000
4,000
2,000
0 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 1/20 2/20 3/20 4/20 5/20 6/20 7/20 8/20 9/20 1/21 2/21 3/21 4/21 5/21 6/21 7/21 8/21 9/21 10/19 11/19 12/19 10/20 11/20 12/20 10/21 11/21 12/21
Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 9 May 20, 2021 NIO
We present a target price of US$51 on NIO, which is based on a target EV/sales ratio of 7.6x (Tesla’s average multiple during 2014-16). Tesla’s sales volume increased 50% annually from 2014-16, a figure consistent with our 2022 forecast for NIO.
We did not apply any discount to our target multiple, given: 1) the much more positive perception of EVs compared to the past; 2) NIO’s focus on China, the world’s biggest and most promising EV market; and 3) the advantages that come with being a local company in the Chinese market.*
* The Chinese government has maintained policy support for local EV manufacturers focused on cars with swappable batteries. While premium NEVs costing over CNY300,000 are excluded from subsidies, NEVs with swappable batteries, such as those made by NIO, are an exception. China has also promptly approved swappable battery standards and safety guidelines.
Table 7. TP calculation Revenue (CNYmn) 54,700 2022F EV/sales multiple (x) 7.6 Tesla’s 2014-16 avg. multiple EV (CNYmn) 413,165 (-) Net debt (34,253) 2022F (-) Minority interests 4,560 2022F Equity value (CNYmn) 442,858 Shares outstanding (mn) 1,362 Equity value/share (CNY) 325.2 Equity value/share (US$) 50.6 Based on USD/CNY of 6.44 Target price (US$) 51.0 Upside potential (%) 52.4 Source: Mirae Asset Securities Research
Figure 13. Tesla: Sales volume and YoY growth (2012-20) Figure 14. NIO: Sales volume and YoY growth (2018-25F)
('000 units) Sales volume (L) YoY growth (R) ('000 units) Sales volume (L) YoY growth (R) 600 150% 350 150%
500 300 120% 120% 250 400 90% 90% 200 300 56% 150 135 52% 60% 60% 200 43% 100 90 50% 30% 30% 100 76 44 50 50 32 0 0% 0 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Source: Tesla, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Mirae Asset Securities Research 10 May 20, 2021 NIO
Figure 15. Chinese automakers (including Tesla): Market cap vs. revenue (2021F)
Revenue (US$mn) Tesla 50
40
BYD 30 Zhongsheng Great Wall 20 Dongfeng Geely
GAC 10 NIO Li Auto Market cap (US$mn) XPeng 0 0 10 20 30 40 50 60 70 80600 90
Source: Bloomberg, Mirae Asset Securities Research
Table 8. Global peer valuations
Price Market cap. Revenue (US$mn) EV/sales (x) P/S (x) P/E (x) ROE (%) Company Ticker (LC) (US$mn) 21F 22F 21F 22F 21F 22F 21F 22F 21F 22F China OEMs BYD 1211 HK 157.00 69,080.4 29,553 35,889 2.5 2.1 2.3 1.9 69.7 52.0 7.8 9.2 NIO NIO US 33.46 54,824.8 5,443 8,812 9.3 5.7 10.1 6.2 N/A N/A -14.7 -0.4 Great Wall 2333 HK 19.30 40,443.7 20,663 23,697 2.2 1.9 2.0 1.7 17.7 13.8 14.0 16.1 SAIC 600104 CH 20.57 37,340.7 127,367 136,280 0.4 0.4 0.3 0.3 9.5 8.4 9.1 9.8 Geely 175 HK 18.30 23,142.7 17,026 19,055 1.3 1.1 1.4 1.2 17.7 14.0 12.6 14.0 XPeng XPEV US 27.64 22,180.2 2,224 4,211 7.9 4.2 10.0 5.3 N/A N/A -11.7 -8.0 Zhongsheng 881 HK 60.00 17,890.2 27,204 31,929 0.8 0.7 0.7 0.6 16.5 13.6 23.7 23.9 Li Auto LI US 19.55 17,685.8 2,955 5,227 4.6 2.6 6.0 3.4 N/A 156.1 -1.7 1.7 Guangzhou Automobile 2238 HK 6.76 16,839.2 10,752 11,844 1.6 1.5 1.6 1.4 7.1 5.8 9.1 10.3 Dongfeng 489 HK 7.20 7,988.9 17,233 18,021 0.7 0.7 0.5 0.4 4.2 3.9 8.7 8.6
Global OEMs Tesla TSLA US 563.46 542,798.2 49,689 67,306 10.9 8.0 10.9 8.1 125.8 86.5 17.7 19.5 Toyota 7203 JP 8,646.00 258,539.9 278,036 291,146 1.7 1.6 0.9 0.9 9.9 9.0 10.7 10.8 Volkswagen VOW3 GR 212.00 149,366.5 303,763 320,533 0.4 0.4 0.5 0.5 7.7 6.9 10.3 11.0 Daimler DAI GR 73.07 95,222.6 210,007 221,954 0.3 0.3 0.5 0.4 7.1 6.8 15.8 14.6 GM GM US 55.53 80,555.8 131,730 148,198 0.6 0.6 0.6 0.5 10.4 8.5 16.8 17.1 BMW BMW GR 83.66 66,189.0 131,902 143,217 0.9 0.9 0.5 0.5 7.6 7.0 10.7 10.9 Stellantis STLA US 18.07 56,377.2 184,208 191,827 0.3 0.3 0.3 0.3 6.4 5.2 15.8 16.1 Honda 7267 JP 3,286.00 54,565.3 131,874 140,096 0.8 0.7 0.4 0.4 8.7 7.3 7.2 8.2 Ford F US 12.11 48,338.8 130,370 152,319 0.3 0.3 0.4 0.3 12.0 7.2 7.6 15.6 Hyundai Motor 005380 KS 225,000.00 42,527.6 103,752 109,766 1.0 1.0 0.4 0.4 10.0 8.6 7.6 8.3 Mitsubishi 8058 JP 2,911.00 39,634.7 127,084 131,767 0.8 0.8 0.3 0.3 9.5 8.6 7.9 8.5 Kia Motors 000270 KS 81,000.00 29,045.5 61,065 63,800 0.4 0.4 0.5 0.5 8.2 7.5 12.6 12.3 Nissan 7201 JP 530.30 20,507.9 86,052 90,774 0.4 0.4 0.2 0.2 17.3 9.0 2.1 5.4 Suzuki 7269 JP 4,521.00 20,346.9 32,755 35,261 0.6 0.5 0.6 0.6 12.3 10.6 10.6 11.3 Tata TTMT IN 314.45 15,299.7 43,263 48,909 0.6 0.5 0.4 0.3 17.2 9.6 12.2 17.1 Subaru 7270 JP 2,062.00 14,534.8 30,622 32,090 0.2 0.2 0.5 0.5 9.7 8.3 8.5 9.6 Renault RNO EU 32.48 11,699.9 58,829 63,623 0.2 0.2 0.2 0.2 15.1 4.9 2.0 6.4 Mazda 7261 JP 866.00 5,014.1 30,260 32,120 0.2 0.2 0.2 0.2 12.2 7.7 3.8 6.0 Source: Bloomberg, Mirae Asset Securities Research
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IV. Company overview
Established in 2014, NIO is a luxury BEV start-up whose early investors include Tencent, Temasek, Baidu, Sequoia Capital, and TPG. The company listed its ADS on the New York Stock Exchange in 2018 and raised an additional CNY7bn from the Hefei government in 2020.
NIO currently sells three SUV models—the ES8, ES6, and EC6—and will release its first electric sedan, the ET7, next year. The company has set itself apart by: 1) maximizing charging convenience through its battery swap and mobile charging services; and 2) lowering up-front purchasing costs with its battery lease/swap subscription program (BaaS). We believe NIO is on track to become one of Asia’s leading luxury BEV brands.
Figure 16. NIO: Revenue and net loss trend Figure 17. NIO: EV revenue and gross margin
(CNYbn) (CNYbn) 20 16 30% Revenue Net loss Revenue (L) Gross margin (R) 15 12 21% 20% 10
5 13% 8 10% 0
(5) 4 0% -2% (10)
(15) 0 -10% -10% 2016 2017 2018 2019 2020 2018 2019 2020 1Q21
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
Figure 18. NIO: Monthly sales volume by year Figure 19. NIO: Ownership overview
(Units) Common stock (mn shares) Voting Major Ownership 8,000 power 2019 2020 2021 shareholders (%) Class A Class B Class C Total (%) 7,000
6,000 William Li 26 149 174 10.6 39.3 5,000
4,000
Tencent 3,000 36 128 164 10.0 17.9 entities 2,000
1,000
0 Bai llie Gifford 108 108 6.6 3.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Company data, Mirae Asset Securities Research Source: Company data, Mirae Asset Securities Research
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NIO (NIO US)
Income statement (summarized) Balance sheet (summarized) (CNYmn) 2020 2021F 2022F 2023F (CNYmn) 2020 2021F 2022F 2023F Revenue 16,258 34,761 54,700 80,311 Current Assets 46,207 50,068 54,970 68,014 COGS -14,385 -28,246 -44,257 -64,249 Cash & equivalents 38,504 40,780 43,539 50,257 GP 1,873 6,514 10,443 16,062 Accounts & notes receivable 2,396 4,556 4,560 6,913 Operating expense -6,481 -8,304 -11,934 -13,509 Inventories 1,082 3,553 3,740 6,299 OP -4,608 -1,790 -1,492 2,553 Other ST assets 4,226 1,179 3,130 4,545 EBITDA -3,561 296 1,790 7,371 Non-current assets 8,435 9,140 10,035 12,416 Net non-operating income -690 -272 -286 -300 PP&E 6,347 6,877 7,550 9,342 PBT -5,298 -2,062 -1,777 2,253 LT investments & receivables 301 301 301 301 Income tax -6 -10 -10 -338 Other non-current assets 2,089 2,263 2,485 3,074 After-tax profit -5,304 -2,072 -1,787 1,915 Total assets 54,642 59,208 65,005 80,430 Minority interests 307 5,000 0 0 NP attributable to owners -5,611 -7,072 -1,787 1,915 Current liabilities 13,976 19,028 20,891 25,848 Payables & accruals 7,084 11,747 13,543 18,582 ST bank/other borrowings 1,931 2,075 2,278 2,819 Other ST liabilities 4,962 5,206 5,070 4,448 Non-current liabilities 8,803 11,986 13,159 16,281 Growth & margins (%) LT bank/other borrowings 5,938 6,383 7,008 8,671 Revenue growth 107.8% 113.8% 57.4% 46.8% Other LT liabilities 2,865 5,602 6,151 7,611 GP growth TB 247.7% 60.3% 53.8% Total liabilities 22,780 31,014 34,050 42,130 EBIT growth -58.4% -61.2% -16.6% TB Shareholders’ equity attr. to owners 27,169 24,041 26,395 32,658 NP growth -50.8% 26.0% -74.7% TB Minority interests 4,693 4,153 4,560 5,642 EPS growth -57.2% 9.5% -74.7% TB Total shareholders’ equity 31,862 28,194 30,955 38,300 Gross margin 11.5% 18.7% 19.1% 20.0% EBIT margin -28.3% -5.1% -2.7% 3.2% NP margin -34.5% -20.3% -3.3% 2.4%
Cash flow statement (summarized) Key valuation metrics/ratios (CNYmn) 2020 2021F 2022F 2023F 2020 2021F 2022F 2023F After-tax profit -5,304 -2,072 -1,787 1,915 P/S (x) 29.9 10.1 6.4 4.4 Depreciation & amortization 1,047 2,086 3,282 4,819 P/E (x) n/a n/a n/a 153.0 Non-cash items 1,379 0 0 0 P/B (x) 2.3 10.4 9.5 7.6 Chg. in working capital 4,830 1,000 1,000 1,000 EV/sales (x) 28.0 9.3 5.9 4.0 Operating cash flow 1,951 1,014 2,495 7,734 EPS (CNY) -4.74 -5.19 -1.31 1.41 Capex -965 -1,738 -2,735 -4,016 BPS (CNY) 26.94 20.70 22.73 28.13 Other -4,106 0 0 0 DPS (CNY) 0.0 0.0 0.0 0.0 Cash flow from investing activities -5,071 -1,738 -2,735 -4,016 Payout ratio (%) 0.0% 0.0% 0.0% 0.0% Increase in debt 3,677 3,000 3,000 3,000 Dividend yield (%) 0.0% 0.0% 0.0% 0.0% Increase in equity 34,762 0 0 0 ROAA -16.2% -12.4% -2.9% 2.6% Other 2,918 0 0 0 ROAE -41.5% -23.5% -6.0% 5.5% Cash flow from financing activities 41,357 3,000 3,000 3,000 Current ratio (x) 3.3 2.6 2.6 2.6 Effects of FX changes -682 - - - Quick ratio (x) 3.2 2.4 2.5 2.4 Net chg. in cash 37,555 2,276 2,760 6,718 Net debt/equity (%) Net cash Net cash Net cash Net cash Beginning cash 990 38,545 40,821 43,581 Net debt/EBITDA (x) 9.7 -109.2 -19.1 -5.3 Ending cash 38,545 40,821 43,581 50,299
Source: Company data, Mirae Asset Securities Research estimates
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Appendix 1
Important disclosures and disclaimers Two-year rating and TP history
Company Date Rating TP (US$) NIO (NIO US) 5/20/21 Buy 51
Stock ratings Sector ratings Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months Sell Expected 12-month performance: -10% or worse
Rating and TP history: Share price (─), TP (▬), Not Rated ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆) * Our investment rating is a guide to the expected return of the stock over the next 12 months. * Outside of the official ratings of Mirae Asset Securities Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise. * The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings. * TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
Ratings distribution and investment banking services Buy Trading Buy Hold Sell Ratings distribution 79.00% 13.00% 7.00% 1.00% Investment banking services 63.16% 31.58% 5.26% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2021)
Disclosures As of the publication date, Mirae Asset Securities Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.
Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Securities Co., Ltd. (“Mirae Asset Securities”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Securities, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Securities except as otherwise stated herein.
Disclaimers This report was prepared by Mirae Asset Securities, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Securities makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Securities or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person, and such person shall not be treated as a client of Mirae Asset Securities by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained
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herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Securities may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views, and analytical methods of the analysts who prepared them. Mirae Asset Securities may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Securities, its affiliates, and their directors, officers, employees, and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Securities and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making, or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Securities. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.
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