The electric vehicles (EV) market is expanding, fueled by robust demand for clean energy automobiles amid emission reduction initiatives worldwide. China is one of the fastest-growing EV markets, representing 44% of the world’s EVs. The Chinese government has been instrumental in boosting the nation’s EV production and sales. In addition to providing subsidies to encourage the adoption of EVs, the government has mandated that a certain percent of all vehicles sold by car manufacturers each year be battery powered. The government’s goal is to have 40% of all car sales in China be EVs by 2030.
The Chinese EV market is witnessing rapid development, with several new companies venturing into this space. Analysts expect the Chinese EV market to register a 31% CAGR between 2021 – 2026.
NIO Inc. (NIO)
Based in Shanghai, NIO is a manufacturer and seller of smart electric vehicles with innovations such as autonomous driving and artificial intelligence. The company sells its products in Mainland China, Hong Kong, the United States, the United Kingdom, and Germany primarily. It also provides energy and service packages to its customers.
NIO delivered 7,931 vehicles in July 2021, representing an impressive 124.5% year-over-year growth. The company’s cumulative deliveries of its ES8, ES6, and EC6 vehicles hit 125,528 in July.
NIO entered a long-term manufacturing agreement with Jianghuai Automobile Group Co., Ltd., and Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd on May 24. Under the agreement, which is valid through May 2024, NIO’s vehicle production is expected to increase by 240,000 units annually.
For the fiscal second quarter, ended June 30, NIO’s revenues stood at RMB8.45 billion ($1.31 billion), representing a 127.2% increase year-over-year. NIO’s vehicle sales increased 127% year-over-year to RMB7.91 billion ($1.23 billion). Its gross profit grew 402.7% from its year-ago value to RMB1.57 billion ($243.77 million).
The Street expects NIO’s revenues to rise 109.8% year-over-year to $1.45 billion in the current quarter, ending September 2021. Its EPS is expected to grow 47.3% in the current quarter versus the same period last year. Shares of NIO have gained 171.2% over the past year.
All seven Wall Street analysts that rated NIO have rated it Buy. The stock’s $66.01 median price target indicates a potential 73.3% upside from its last closing price of $38.10. The 12-month price targets range from a low of $57.00 to a high of $72.00.
Li Auto Inc. (LI)
LI, through its subsidiaries, designs, develops, manufactures, and sells smart electric sport utility vehicles (SUVs) in China. It concentrates its in-house development efforts on its proprietary range extension system, next-generation electric vehicle technology, and smart vehicle solutions. LI is based in Beijing.
LI’s overall deliveries were up 11.4% month-over-month and 251.3% year-over-year in July 2021, representing a remarkable rate of growth. The company delivered 8,589 Li ONEs in July, crossing the 8,000-vehicle milestone for the first time while hitting a new record. LI plans to launch a series of major OTA upgrades to enhance its product offering by the end of this year.
LI’s vehicle sales increased 311.8% year-over-year to RMB3.46 billion ($528.66 million) in the fiscal first quarter, ended March 31. Its total revenue grew 319.8% from its year-ago value to RMB3.58 billion ($545.68 million). Its gross profit stood at RMB616.73 million ($94.13 million), up 802.9% from the same period last year. And its cash and cash equivalents balance rose 671.4% from the prior-year quarter to RMB8.18 billion ($1.25 billion) over this period.
The $3.27 billion consensus revenue estimate of for its fiscal period ending December 2021 indicates a 123.2% increase year-over-year. The Street expects the company’s EPS to rise 38.3% year-over-year in the current year. Over the past year, LI gained 81.8% to close yesterday’s trading session at $28.03.
The six Wall Street analysts that rated LI rated it Buy. The $44.75 median price target indicates a potential 59.7% upside from its last closing price. The 12-month price targets range from a low of $37.00 to a high of $62.00.
Niu Technologies (NIU)
NIU in Beijing designs, manufactures, and sells smart electric scooters in China. Its NIU application synchronizes with its smart e-scooters and communicates with its cloud system. The company enables users to receive real-time information relating to their smart e-scooters through its application.
On April 7, NIU announced the launch of five new electric urban mobility vehicles for China and the global markets. The products are designed to offer a more comfortable riding experience to its customers. These advanced product additions should allow the company to strengthen its position in the micro-mobility space.
NIU’s revenues increased 46.5% year-over-year to RMB944.75 million ($146.32 million) in its fiscal first second ended June 30. Its operating income grew 76.4% from its year-ago value to RMB99.33 million ($15.38 million), while its non-GAAP net income improved 53.4% year-over-year to RMB103.97 million ($16.10 million). The company’s net income per ADS increased 56.2% year-over-year to RMB1.14 ($ 0.18).
Analysts expect NIU’s revenues to increase 57.9% year-over-year to $214.40 million in the current quarter ending September 2021. A $0.28 consensus EPS estimate for the current quarter indicates a 218.6% rise from the same period last year. Shares of NIU have gained 9.4% intraday to close yesterday’s trading session at $24.33.
The $30.50 median price target indicates a potential 25.4% upside from its last closing price. The 12-month price targets range from a low of $15.00 to a high of $46.00.
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NIO shares fell $0.24 (-0.62%) in after-hours trading Wednesday. Year-to-date, NIO has declined -20.27%, versus a 18.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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