@IsabellaBear, following your recommendation on another thread I have had a look into NIO and would like to understand why you believe it is a clear “buy” and believe that it will grow rapidly in the coming months.
On one hand, I agree that its vehicles and batteries look very good, cannot comment on the autonomous side as I have not been able to find alot of information on it. However, its finances are a completely different matter.
For example, from its 2019 annual report we can see that its liabilities (2.8 Billion USD) greatly exceed its assets (2.1 Billion USD), is this sustainable?
From a quick glance it seems complicated. In 2019 it made a loss of 1.6B USD, this is a particularly poor result as it means that the net loss is greater than the yearly revenues of 1.1 Billion USD (rounding up), so without even considering the gross profit margin the company would probably have to at least triple its revenue figures in 2020 (year on year) to be even close of covering a similar level of costs to thos incurred in 2019 (more likely something like multiply by 5 to have a fair chance).
In addition, it shows that its current assets of 700 Million USD would not even be able to cover half of this loss if the company achieved a similar loss in 2020. This is concerning as it leads to the underlying problem, will banks be willing to finance a company that has much more debt than assets? Is there any additional collateral available? If not, then a possible option is that Nio will have to raise a significant portion of equity, large number of new shares that will dilute existing shareholders. The alternative would be to face financial challenges, unless its sales grows like a rocket, which seems unlikely in the times of the Covid-19 global pandemic and possible increase to the unemployment levels worldwide, despite the appeal of electric vehicle to an everly-more concious world with regards to reducing CO2 emissions.
Another risk is obviously the China-USA trade war and the possible future fear of chinese companies that may rise in the western countries following this, the pandemics origins and the growing outroar for national production and workforce (Move to producing critical things at home and public votes like Brexit and Trump / MAGA). This can be solved by a large domestic Chinese demand that can bump their sales… Where are most of Nio’s sales currently from? China?
Also, how do its clothes and home offerings fit in with the electric vehicles/batteries side?
Having said this, I have bought 6 NIO Shares and depending on if there is a good solution to the risks I pose I may invest more, I am very keen on electric vehicles and batteries. I am willing to invest as long as there is a decent overall business case.
Does anyone have any thoughts on NIO and the points I am raising?
The recently issued Annual Report for 2019 can be found here: Nio 2019 Financial Report
The balance sheet is on page 156 of 930 whilst the income statement is on page 158.
I missed this @revelcsi1iicidem, I pretty much only looked at the company’s website and its last annual financial report (2019) for my preliminary analysis (summarised in my post above). What are the conditions of the loan? Is it from the chinese government?
Yeah they did have to move hq but I think it wasn’t to much of a hassle, there smashing sales and they’ve had a very rough time, they was getting a billion pound funding before virus but didn’t go through, I think it was planned to wait so they can disguisedly mix it in, the price was about to moon last time they got news on funding
I know! I think sometimes they play it down, it’s money don’t forget there not going to come out and say we are going to smash it. They will always come out doubting in a way so they can cover themselves. But BIG point i take from this is if government invests they are NOT losing money. (Not saying allll the time but China ain’t stupid) I’m so bullish on this stock, I reckon could outpace Tesla in terms of sales etc, telsa in limelight cos America the world runners