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Nio share price rallies as Q3 deliveries pick up

Chinese EV manufacturer Nio saw share price exceed the four dollar mark this week, thanks to stronger Q3 updates.

Chinese electric car maker Nio Limited's share price is off to a good start this year, with stocks rallying to a seven-month high of US$4.20 per share on Monday (06 January).

This price increase is the likely result of an improved 2019 third-quarter, as well as a higher number of deliveries for the month of December 2019.

A breakdown of Q3 2019 results

Vehicle deliveries were 4,799 in Q3 of 2019, including 4,196 ES6s and 603 ES8s, compared with 3,553 vehicles delivered in the second quarter of 2019.

Vehicle sales were RMB1,733.5 million (US$242.5 million) in the third quarter of 2019, representing an increase of 22.5% from the second quarter of 2019 and an increase of 21.5% from the same quarter of 2018.

At the start of this week, the company also provided another investor update, reporting a total of 3,170 vehicle deliveries for the month of December 2019.

This represents a 25.4% month-over-month growth, which the company attributed to strong sales of both the ES6 (2,537 units) and the ES8 (633 units). As of December 31, 2019, aggregate deliveries of the ES6 and the ES8 reached 31,913 vehicles, of which 20,565 were delivered in 2019.

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Share price revisions

Thanks to this latest stretch of good news, Nio’s share price performance thus far this year has already exceeded the highest price recorded in the final three months of 2019.

William Bin Li, founder, chairman and chief executive officer of NIO, says he expects the company’s order momentum to ‘continue going forward’, with its product offerings ‘further deepened and upgraded in 2020’.

He is also confident that despite a ‘soft auto market’, the smart premium EV sector will outperform the industry in its growth rate in the foreseeable future.

The optimistic outlook has prompted Bank of America Securities analyst Ming-Hsun Lee to reiterate his rating on the stock at ‘neutral’. He also increased the price target from US$3.80 to US$3.90.

‘While we believe the stock's fundamentals have bottomed out, the current valuation partially factors in the improved sales momentum. Thus, we reiterate our “neutral” rating on NIO,’ said Hsun.

Similarly, investment banks Piper Jaffray and Goldman Sachs also reiterated their ‘neutral’ stance.

On the other hand, Bank of America Merrill equity researchers revised their ratings on the stock from ‘underperform’ to ‘neutral’ based on a December 31 report.

Caution for the rest of 2020

Still, it might be too early to call the Q3 and December results a victory, as headwinds are starting to pick up again for the company, with Tesla ramping up its local output in 2020, and overall 2019 car sales in China down 7.5% - the second straight year of decline.

The China Association of Automobile Manufacturers (CAAM) last month also predicted that nationwide vehicle sales will fall two percent to 25.3 million units in 2020.

Add to that, the Chinese electronic vehicle (EV) market is still feeling the effects of a slump, with EV sales down 43.7% in November 2019, according to CAAM data.

It was also only in November 2019 that share price of the Shanghai-based manufacturer was on a rapid decline on the back of mounting losses.

Share value had fallen to a record-low of US$1.52 per share that month, a stark contrast from the US$9.90 price tag that it launched with in September 2018.

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