Nio Continues as Top China Pick at Deutsche Bank

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By Michael Elkins

A Deutsche Bank analyst reiterated a Buy rating and $39.00 price target on Nio Inc (NYSE:NIO) following the company’s earnings release last week. The electric vehicle maker reported mostly solid 2Q results. EPS was ($1.34) missing Deutsche Bank's ($1.17) estimate. However, deliveries for the quarter were reported at 25,059 units, leading to revenue of 10.3 billion RMB, better than the consensus estimate of 9.8 billion RMB due to stronger ASP/mix.

Nio’s management provided their future outlook for the company’s 3Q, calling for 31,000- 33,000 deliveries, implying 10,300-12,300 for September. Deliveries in those numbers would translate to 2.8 billion-13.6 billion RMB in sales.

For 4Q, management indicated it expects to deliver record monthly volume every month with a peak in December that includes 10,000 ET5 units.

Overall, Deutsche Bank made some minor changes to their forecasts, raising their full-year deliveries forecast by 5,000 units to 140,000, implying ~57,000 in 4Q vs. just 32,000 in 3Q. The analyst reiterated Nio as a top China pick as the company’s existing 866 models continue to sell reasonably well despite being older than competing EV products and more expensive. Monthly sales in Aug were only down about 400 units.

The analyst wrote in the note, "In addition to the product cycle, we believe the company's efforts around user experience, battery swapping, overseas expansion, and internal battery cell development go very much underappreciated and will eventually show clear differentiation as the local Chinese market gets increasingly competitive."

Shares of NIO are up 1.72% in pre-market trading Monday.