Beijing, China-based Niu Technologies (NIU) is a smart urban mobility solutions provider. The company’s offerings include NQi, MQi, UQi, and NIU Aero. It has expanded into 38 countries with retail stores across cities in Asia, Europe, and Latin America. For its fiscal third quarter, ended September 30, 2021, its revenue increased 37.1% year-over-year to $190.33 million, while its net income came in at $14.23 million, up 14.6% year-over-year. Also, its total volume of e-scooter sales increased 58.3% year-over-year to 397,079 units.
But the stock declined in price after the company reported its third-quarter financials on November 22 because its revenue and EPS failed to meet analysts’ expectations. The stock has declined 35.1% in price over the past month to close yesterday’s trading session at $17.07.
Nevertheless, NIU provided a positive outlook for the fourth quarter. Its revenue is expected to be between RMB 840 million ($131.93 million) and RMB 910 million ($142.92 million) in the fourth quarter. The company also expects the current difficulties in international shipping to improve in the current quarter.
Here are the factors that could shape NIU’s performance in the upcoming months:
Growth of the Chinese EV Industry
China is one of the world’s top electric vehicles (EV) markets. According to a Fitch Ratings report, deliveries of EVs in China nearly tripled in the third quarter of 2021, despite the ongoing, global semiconductor shortage. Furthermore, according to XPeng Inc. (XPEV) CEO He Xiaopeng, new energy vehicles (NEV) are expected to make up more than 35% of new vehicle sales in China in 2025. So, NIU should benefit from this tailwind.
In terms of trailing-12-month levered FCF margin, NIU’s 12.65% is 115.2% higher than the 5.88% industry average. The stock’s 6.97% trailing-12-month net income margin is higher than the 6.56% industry average. And its trailing-12-month ROCE, ROTC, and ROTA of 22.02%, 13.31%, and 9.08%, respectively, are higher than the 17.23%, 7.56%, and 5.96% industry averages.
Favorable Analyst Estimates
NIU’s revenue is expected to increase 60.1% in its fiscal year 2021 and 49.9% in fiscal 2022. The company’s EPS is expected to increase 61% in the current year and 59.1% next year. Also, its EPS is expected to grow at a 6.3% rate per annum over the next five years. Wall Street analysts expect the stock to hit $38.50 in the near term, which indicates a potential 125.5% upside.
NIU has not been in the headlines regularly. However, as a lesser-known entity, NIU is also less vulnerable to the Chinese authorities’ crackdowns on top enterprises. Furthermore, Wall Street analysts expect the stock to more than double in price in the near term. So, we think it could be wise to add the stock to your watchlist now.
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NIU shares were trading at $16.88 per share on Wednesday morning, down $0.19 (-1.11%). Year-to-date, NIU has declined -39.82%, versus a 25.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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