NIO
📈 NIO reported significant growth in vehicle deliveries for Q4 2023 (45.2% YoY) and the full year 2023 (38% YoY), meeting Q1 2024 delivery guidance with 40.1% YoY growth.
💰 Despite revenue growth (13.2% YoY in Q4) and improving vehicle margins (13.1%), the company continues to experience substantial operating and net losses, having never achieved operational profitability since its founding.
🤔 Investing in NIO is presented as a high-risk venture typical of growth stocks, requiring belief in future potential and market disruption (like OpenAI) rather than current financial stability, as it operates on ‘finance without finance’.
@invertirdesdecasa:
“Let’s look at NIO’s latest report and, much more interestingly, draw a conclusion. As of April 1st, before the US market opened, on April 2nd, Nio closed at $3.87 per American Depositary Receipt. It’s a company based in China, and the ADR trades in the United States. You can see a drop in the last calendar year of around 15% and a quite pronounced fall from the maximum prices of the last year. If we looked at a chart of the last 5 years, the fall would be even greater. The market became very euphoric in 2021 with this company. At the time of recording, it capitalizes at about $8 billion. Don’t forget, $8 billion is the price of the entire company. If the whole company is cheap or attractive as an investment, this stock, as a small part, is also attractive as an investment thinking about the future. Let’s look at some important points or highlights from the earnings report, which I will, of course, take from the source for you to see, and we will translate it below. Fourth-quarter deliveries, meaning cars delivered to consumers, reached 72,689, a quite interesting growth of 45.2% year-over-year. In the year 2023, 221,970 vehicles were delivered, 38% more versus the total deliveries of 2022. Comparing some key points of its latest quarterly earnings report versus the fourth quarter of 2022, we have to say that sales reached almost $2.7 billion, a growth of 13.2%. This is very important: the profit margins per vehicle, reported by all electric car companies from China and Tesla (which has its largest factory there but is a US company), were 13.1%, improving year-over-year. However, it’s true that the best companies are already near a 20% margin per vehicle, like BYD, Li Auto, and Xiaomi, a company that has been growing quite a bit. Also improving were the total gross margins as a company, meaning not just for vehicles but also including a services and auto parts segment. And here, as you can see, the operating losses, because NIO still generates operating losses, and we’ll talk about this, were reduced versus the previous year’s quarter, meaning it lost less money, slightly improving its profitability versus the previous year but still losing money. From an annualized perspective of its results, since it presented the fourth quarter, we can already see the annual results. Sales grew by 18.2%. Don’t forget, this is in Renminbi; you need to divide by 7.29 to see the results in dollars, but the growth rates are quite similar. Profit margins per vehicle also grew significantly year-over-year. This is good, and it would be good if this trend continues. See this, the gross margin of the entire company, therefore, as vehicle sales are one of NIO’s main activities, the gross margin increased. And here you can also see that, as we were discussing, operating losses are still there but were slightly reduced year-over-year. The final net losses were a bit larger due to investment issues and tax matters, which made the net loss, the final net result, slightly larger than the previous year. But the important thing is that operations improved somewhat. However, the company, as I say, is losing money and, in fact, has been losing money since inception, meaning since its foundation. Operationally, NIO has not yet generated positive operating results, and we will talk about this, of course. However, it has cash and equivalents of $5.7 billion, which is greater than all its short and long-term debt, which is good on that side. And it must be said that in 2023, they did not generate positive operating cash flows; they spent more money operationally than they generated. Therefore, that’s something you have to keep in mind, and it’s even a characteristic of growth companies that we will discuss. However, what the management says here in this English part is that based on the liquidity they have, based on the business growth they are seeing, and the credit facilities they can access, plus the liquidity and cash they have, they will be well-financed for the next 12 months. That’s what most companies say in their earnings reports if they see a good future for the next 12 months or not. And part of that future is also reflected in that earnings report, which we can already see how it is materializing or not. The company, in this fourth-quarter report, expected that for the first quarter of 2024, which just ended a day or two ago, deliveries would be between 41,000 and 43,000 vehicles, a growth of around 36% to 43% year-over-year, meaning versus the first quarter of 2023, and revenues from $1.7 billion to $1.75 billion, a growth of around 25-30% versus the sales of the first quarter of 2023. And as I was saying, we can already see if this is materializing or not because although Nio hasn’t presented its quarterly earnings report yet, all Chinese companies, in something I find very transparent and clear (Tesla doesn’t do it, but other entities report Tesla’s sales in China), report the sales they have within China and globally, because many already sell globally, Nio being one of them. Therefore, it already reported January, February, and March deliveries. As you’ll see, in all months, there was very good growth in deliveries. Therefore, in the quarter, car deliveries grew, as you see here, to 42,094, in line with the management’s projection in the annual report for the fourth quarter of 2023, a growth of 40.1% year-over-year, a very good growth rate. And what it says here, very small, is that sales or deliveries of the ET9 car, there’s a small video about this, just started in March, so we have to see how all this develops. Today, NIO capitalizes at $8 billion, has total sales of $9 billion. Those are the total sales, growing rapidly in its sales, in what are its revenues and sales in what is probably the world’s largest market for electric cars. Will it someday achieve a volume of operations, of deliveries, large enough to be able to generate profits as a company? Well, that’s a question an investor in NIO, I don’t have it in my portfolio, should answer, beyond what happens today, beyond that fear that comes from saying, ‘Today this is happening, today it’s not earning.’ There lies the key. Will the company be able to have that volume and continue growing to be able to generate profit tomorrow? If so, believe me, the value it has today could be very attractive if it generates good profits tomorrow. Amazon grew with losses for easily its first 10 years. There’s a well-known interview with Jeff Bezos where they ask him, ‘Listen, the company is losing billions of dollars and is worth much more than in previous years.’ And Jeff laughs with that laugh he has and says, ‘It seems like new math, right?’ the interviewer asks him. Why is that? That’s investing in growth companies. It’s not for everyone; it has more risk, of course, things can go wrong, and the investment can go to zero. But well, that’s what we have today: a company with very good growth in the world’s largest market for electric cars, with technology, as you saw in the video, clearly superior to many of its European rivals, but that doesn’t mean it has already won the race. It means it has potential. One decides whether or not to believe in that future potential.”
Watch the exact part of the video where @invertirdesdecasa talks about NIO Inc. here:
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