Source: Beast Finance Author: Beast Finance
Shares of Niu Electric (NIU) have fallen 6% so far this year. Although the company operates in the booming electric vehicle market, the restrictions of the epidemic and weak sales in Europe have caused the sales of Mavericks to continue to decline in the European market. Boldbeast Finance believes that due to the reduction of economies of scale, this may have a negative impact on Mavericks. negatively affect its financial performance. In addition, the increase in commodity (lithium) prices has also brought additional negative impacts on Niu Electric. Mavericks' current upswing in fundamentals doesn't match the risks of buying stocks, so we don't think now is the best time to invest in Mavericks' stocks.
Financial results for the fourth quarter of 2022
Due to the impact of the epidemic, the customer flow and sales of Niu Electric's offline stores in the Chinese market are decreasing. So Niu Electric continues to face sales pressure. As a result, in the fourth , Niu's total sales fell 42% year-on-year to 138,279 units. The biggest drop was in China, where sales fell 42% year-on-year to 118,065 vehicles. Based on management's comments, the company is looking forward to a sales recovery in first-tier cities as restrictions on the outbreak are fully lifted. Sales in overseas markets fell 39% year-on-year to 20,214 units in the fourth . The decline in sales in overseas markets was due to the delay in sales due to the ongoing business restructuring of the company's main partners in Europe.
Future Performance Forecast
(1) Sales & Revenue
Since China has fully lifted the restrictions on the epidemic and the normalization of orders in Europe, Boldbeast Finance expects that Niu Electric's sales in China and Europe in 2023 will recover. Therefore, we expect that Niu Electric's sales in the Chinese market will increase by 40% in 2023, and will gradually decline to 10% by 2026. In terms of overseas sales, we expect Niu Electric to recover (30% growth) in 2023 and gradually drop to 10% by 2026.
In addition, we expect Niu Electric's model revenue in all markets to continue to grow by 5% in 2023 and 2024, and to decline to 3% in 2025 and 2026. The rapid growth in 2023 and 2024 is mainly due to the need to transfer higher costs and increase the share of high-end brands.
(2) Production and operating costs
In terms of production and operating costs, our forecast is mainly based on the following factors:
Gross profit margin: We believe that before 2026, the gross profit margin of Xiaoniu Electric will gradually improve, because business growth and the growth of economies of scale will It will help reduce the cost per unit of sales of Maverick Electric for some time to come. Therefore, we predict that by 2023, due to the increase in the share of high-end brands and the recovery of sales volume, Niu Electric's production and operating costs per vehicle will drop by 5%.
Sales and marketing expenses: We expect Niu's sales and marketing expenses to stabilize at 14% (of revenue) in 2026. We think it is difficult for Niu Electric to significantly improve its expenditure in this area, because the sales growth of offline channels is achieved by increasing the store network.
G&A expenses: Due to growing economies of scale and more efficient administrative expenses, we expect Niu to spend slightly more on G&A expenses as a percentage of revenue in 2026, up from 4.3% (as a percentage of revenue) in 2023 increased to 4%.
Therefore, we currently do not see the potential for significant improvement in Mavericks' operating margins. Monster Finance believes that the increase in the share of high-end brands is the key driving force for Mavericks’ future performance growth. It can not only increase the gross profit margin of Mavericks, but also help improve Mavericks’ profitability.
Factors that are good for Mavericks Electric stock
(1) Epidemic: The full lifting of epidemic restrictions will help restore demand for Mavericks' products in the Chinese market. A pick-up in traffic to the company's stores, buoyant business activity and renewed consumer confidence in China will all help boost Niu's sales in the coming quarters.
(2) Profit margin: By increasing economies of scale, increasing the share of high-end models, and effective cost control, Niu Electric's operating profit margin can be improved, thereby supporting the company's stock price.
(3) Release of new models: By successfully releasing new models in the high-end market, Niu Electric's sales and profit margins can be increased. Therefore, according to the management's opinion, the company plans to officially launch new products in the first quarter of 2023
(4) Macro economy: The normalization of the macro economy and the recovery of business confidence may increase franchisees' demand for the company's products, which may It will provide strong support for Mavericks Electric's future income.
Risks
(1) Macroeconomics: High inflation coupled with lower real disposable income and lower consumer confidence could lead to lower consumer spending in the discretionary sector, which could put pressure on Niu's revenue.
(2) Profit margin: The increase in material (lithium) costs and the reduction in business scale may lead to an increase in the production and operating costs of Niu Electric, which is also detrimental to the profitability of Niu Electric.
Conclusion
Boldbeast Finance believes that now is not the right time to invest in Mavericks electric stocks. Based on our calculations and forecasts, we do not see the potential for significant improvement in Niu's financial performance and operating profitability. In addition, the company continues to face pressure from rising commodity (lithium) prices and macroeconomic weakness.