Nio is properly valued and has the potential for large growth! | Utradea

Company Overview:

Investment Information:

  • ES8 is a 6–7 seat premium electric SUV that features 2 induction motors (240 kW). The ES8 accelerated from 0–100 kph in 4.4 seconds and is ranked 5 stars by the C-NCAP (Chinese New Car Assessment Program) for their safety standards. Lastly, the ES8 can go roughly 355 km on a single charge. IN 2020, Nio sold 10,861 of their ES8 models.
  • ES6 is a 5-seat high-performance SUV that features one magnet motor (160 kW) and one induction motor (240 kW). The ES6 can accelerate from 0–100 kph in 4.7 seconds and can reach up to 430km on a single charge. In 2020, Nio sold 27,945 of their ES6 models.
  • EC6 is a Coupe SUV that features one (160 kW) magnet motor, and a (240 kW) Induction motor. The EC6 is capable of accelerating from 0–100 kph in 4.5 seconds, and it can go 440 km (70 kWh battery) to 615 km (100 kWh battery) on a single charge. The EC6 also features a 2.1 square meter panoramic glass roof. In 2020, Nio sold a total of 4,922 of their EC6 models, basically just in Q4 alone (16 were sold in Q3 and none in Q1/Q2).
  • ET7 is a Sedan that offers 1 front magnet motor (180 kW), and one back Induction motor (300 kW). The ET7 is very aerodynamic and can accelerate from 0–100 kph in a mere 3.9 seconds. The ET7 has 5-star safety ratings from both Chinese and European Assessment Programs. The ET7 also features their computing system (Adam) and super sensing system (Aquila). This vehicle is said to be able to reach distances of 1000 km on a single charge (with their 150-kWh battery).
  • Financial Performance (Good): Vehicle sales are up by 106.08% YoY, and their cost of sales is only up by 63.72%, which means that their margins are improving. This year was Nio’s first year having a gross profit, which equalled $287M (USD). Their SG&A expenses decreased by 27.88% YoY, which is good and helps their margins. Lastly, Nio decreased their operating loss by 58.42% which shows that they are making their way towards profitability, which would be a huge milestone.
  • Financial Performance (Bad): R&D expense decreased by 43.82% YoY. While this usually is a good sign, R&D is important to Nio’s business model and future successes, so I would like this figure to be higher. Although Nio decreased their operating losses, they still reported a $706M operating loss (USD) and a $813M net loss, this is not favourable for investors and might scare away potential investors.
  • Stock Incentive Plan: Nio’s stock incentive plan was designed to attract and retain the best possible personnel to promote the success of Nio’s business. Under their 2015, 2016, 2017 and 2018 stock plans, there are currently 79.32M shares outstanding, that have yet to have been granted. If all of these outstanding shares were to be granted, it would cause dilutionary effects of roughly 6.45%.
  • Share Options: As of December 31st,2020, there are 32.5M common shares available in options that are yet to be exercised (and converted into common shares). If these options were to be exercised, it would cause a dilutionary effect of 2.6%.
  • Restricted Shares Outstanding: Currently, there are 1,735,744 shares outstanding that are classified as “restricted”, these shares will be vested gradually over a period of time, these shares have a weighted-average period of 3.6 years. If these shares were put on the market today it would cause dilutionary effects of 0.14% over 3.6 years, which is essentially negligible.
  • Bin Li (CEO & Chairman): Li founded and served as the director for Beijing Bitauto E-commerce Co. from 2000–2006. After that, Mr. Li served as the chairman of the board of Bitauto Holdings. (Formerly listed on the NYSE. Mr. Li has also been named as one of the top 10 most influential/distinguishable people in China’s automotive industry by CADA in 2008. As we can see Mr. Li has a history in the automotive space and is a distinguished person in the space as well, which can help vouch for his credibility.
  • Lihong Qin (President & Director): Prior to Nio, Mr. Qin was the Chief Marketing Officer and Executive Director at Longfor Properties Co. from 2008–2014. Mr. Qin also served as a Senior Consultant and Deputy GM of Anhui Chery Automobile Sales and Service Company form 2005–2008. Mr. Qin has both a background in the Auto Industry (though Anhui Chery) and in the field of management (through Longfor Properties).
  • Feng Shen (Executive VP): Shen worked in several executive management roles prior to working at Nio. Mr. Shen was the President and CTO at Polestar China, President and VP at Volvo Cars China and Volvo Asia-Pacific, Chairman at China-Sweden Traffic Safety Research Center from 2010–2017. Prior to this he worked at Ford Motor Company as a Powertrain manager. Mr. Shen has extensive experience in both the management space (Polestar and China-Sweden Traffic), and the automotive industry (Ford, and Volvo).
  • Xin Zhou (Executive VP): Zhou served as the Executive Director at Qoros Automotive C. from 2009–2015, and prior to this was the Engagement Manager at McKinsey Co. from 2007–2009. Mr. Zhou has experience in both the Automotive Industry, as well as in management positions, and his experience will be an asset for Nio in the future.
  • Wei Feng (CFO): Feng was previously the Managing Director and Head of the auto/auto parts research team at China International Capital Corp. from 2013–2019. Prior to this he was an industry analyst at Everbright Securities from 2010–2013. Mr.Feng has great experience in the financial industry, and has focused on the auto industry and researching the industry.
  • Ganesh Iyer (Chief Information Officer): Iyer has over 32 years of experience In the autonomous technology, hi-tech, manufacturing, and telecom industries. Mr. Iyer was previously the VP of IT at Tesla from 2012–2016 and was the Senior IT roles at VMWare from 2010–2012. Mr. Iyer has plenty of experience that will help him to drive the future progression/growth at Nio.

Investment Valuation:

Risks:

  • Dilution: Nio has multiple different streams of possible dilution that will negatively affect their shares price, these streams consist of Nio’s Share Incentive Plan, Stock Options, and Restricted Stock Units. All of these streasm would combine to make a total dilutionary effect of roughly 9.19%, which is not bad. Typically, high growth stocks have large amounts of dilution, and some of Nio’s dilution is spread over 3 years, so I do not see this being a huge risk, although it is worth keeping in mind.
  • Financial Performance: Nio reported an operating loss and net loss of $706M and $813M respectively, this level of loss is not great to see as investors however they are making moves toward profitability which is good to see. Furthermore, Nio almost cut their R&D spending by ½, which is not favourable in my eyes because I would rather Nio spend the extra money to further develop their technologies and be the most technologically advanced EV maker in China/the World.

Catalysts:

  • Financial Performance: Nio exhibited great growth YOY, while keeping the cost of sales growth significantly lower than their revenue growth. Furthermore, Nio reported a gross profit for the first time and decreased their operating losses significantly. If Nio can continue to improve their financial reports/position, and become profitable in the near future, then this will serve as a huge catalyst for Nio.
  • Social Sentiment: According to Utradea’s Social Sentiment Tracker, Nio is currently the 20th, 16th, and 18thmost trending stock om Reddit in the past 4, 24, and 48 hours respectively, with an overall positive sentiment. As we know Reddit can have beneficial impacts on stocks that they target and is important to keep in mind as a current/future investor.
  • Technology: Nio has been consistently improving upon their technology, moving from their 1stto 2nd, and now to their 3rdgeneration of Electric Powertrains. Nio has consistently been improving their motors (both magnet and induction) to futher the technology of their EV’s and offer superior range. Furthermore, Nio is set to release their 150-kWh battery in late 2022, this battery is expected to have a range of 1000km, if this is true they will have the longest range of any EV by a long shot, which will help show Nio’s superior technology.

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