Damo: Target price for NIO - SW (09866) “gain” rating of HK$68.5

The Zhitong Finance App learned that Morgan Stanley released a research report saying that NIO SW (09866) management reiterated that the company will prioritize driving profit growth through sales growth and operating leverage, and also reiterated that it will achieve non-GAAP (non-GAAP) adjusted profit goals this year. The bank gave NIO H Shares an “increase” rating, with a target price of HK$68.5.

According to the bank, the company expects to stabilize the gross margin of vehicles at about 18% by improving efficiency. Meanwhile, sales, general and administrative expenses are expected to fall to 10% to 11% of revenue in the second half of the year, and will fall below 10% in the long term; non-GAAP R&D expenses will remain at around RMB 2.5 billion per quarter.

The bank believes that NIO's balance sheet financing pressure has been removed. It is expected to exceed 60 billion yuan in cash and equivalent (in the third quarter) and 70 billion yuan next year. The electricity exchange business is expected to approach break-even within three years.