"Big Banks" JP Morgan: NIO's first-quarter performance is mixed, raising the annual sales forecast by 13%

JP Morgan released a report indicating that NIO-SW (09866.HK) (NIO.US) had mixed results in the first quarter, with gross margins slightly above the bank's and market expectations, mainly due to a narrowing of losses from other services; however, increased operating and marketing expenses due to new products and channel expansion led to net profits falling below expectations (6% lower than JP Morgan's estimate). The bank expects that in the final quarter, non-GAAP operating profit will break even, driven by strong sales growth and improved profitability. Additionally, the bank noted that NIO's management emphasized cost-cutting measures to enhance profitability. The bank has raised its earnings forecast to reflect a gradual improvement trend but noted the challenging market competition environment, maintaining a "neutral" rating on NIO ADR with a target price of $4.10.

JP Morgan stated that NIO's management emphasized its cost-cutting and organizational restructuring measures to enhance operational efficiency. In addition to optimizing the sales teams and joint services for the NIO and Onvo brands, NIO has also restructured its supply chain team and integrated the R&D teams of its three major brands, similar to the recent integration models of Geely and ZEEKR. NIO's management expects R&D expenses to decrease by 20% to 25% this year and anticipates that SG&A expenses will account for 10% of revenue in the fourth quarter.

The report indicated that NIO plans to launch two new models under the Onvo brand (L90 in the third quarter and L80 in the fourth quarter) and will refresh the ES8 in the fourth quarter. JP Morgan quoted NIO's management as stating that total monthly sales will reach 50,000 units by the end of this year, which is a key driver for breaking even in operating profit in the fourth quarter. JP Morgan has raised its forecast for NIO's total sales in 2025 by about 13%, from the original 282,000 units to 320,000 units, reflecting the momentum so far this year and management's comments. However, JP Morgan's forecast remains below the management's guidance of 440,000 units announced at the beginning of the year. JP Morgan's cautious view reflects the competitive dynamics faced by NIO and the overall Chinese automotive market