Sun notes that having modelled in a 167 million share sale in 2025 for Nio, the placement was predictable.
He writes in his Mar 27 report: “However, we believe Nio's share price will still come under pressure in the near term, as investors lack confidence in Nio’s execution capability in increasing sales and narrowing losses.”
Meanwhile, management has guided that Nio’s vehicle margin will further expand from the 2QFY2025 as economies of scale kick in and expenses begin to taper off.
Sun notes that although the group has kept its breakeven target for the 4QFY2025, he is less optimistic.
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He writes: “Therefore, we cannot rule out additional share sales if business does not progress as the company plans. Our base case has Nio making a loss of CNY4.5 billion ($830.7 million) in FY2026 and turning profitable in 2027, later than what management has guided.”
Nio, with nine new models planned, remains confident of doubling vehicle sales this current FY2025.
This compares with Sun’s 35% growth forecast, given the potential cannibalisation between Nio and its second brand, Onvo, as well as Firefly, its third brand's niche focus.
With this, the analyst has kept his fair value estimate on Nio at US$5.60 ($7.51) per American depositary share (ADS), which implies 1.1 times FY2025 price-to-sales.
He has given the stock a four-star rating against Morningstar’s five-tier scale. According to Morningstar, a four-star rating means that “appreciation beyond a fair risk-adjusted return is likely”.
Shares in Nio closed HK$2.30 lower or 7.07% at HK$30.25 on Mar 28.
