CITIC Securities International: Nio's product cycle upswing drives profit improvement

CITIC Securities International published a report indicating that Nio (09866.HK) is expected to generate revenue of RMB 34.65 billion in the fourth quarter, a quarter-on-quarter increase of 59%, primarily driven by rapid growth in delivery volume and the ramp-up of the high-end model NIO ES8; the revenue per vehicle is approximately RMB 253,000, an increase of about RMB 33,000 quarter-on-quarter. The gross margin continues to improve, with significant contributions from product structure optimization. The expense ratio has significantly decreased, and profits have achieved positive quarterly results for the first time.

Looking ahead to 2026, the company expects first-quarter delivery volume to be around 80,000 to 83,000 vehicles, representing a year-on-year growth of 90%-97%; of which, cumulative sales from January to February are approximately 48,000 vehicles, corresponding to a median sales volume of about 33,500 vehicles in March. The company maintains its full-year sales growth target of 40%-50% for 2026. The product cycle continues to trend upward, with an expected increase in the proportion of high-end models. In 2026, the company plans to launch multiple new models to enhance its product matrix, including the flagship SUV NIO ES9 and several refreshed models, while the Lada brand will introduce the L80 and upgrade the L60 and L90. In the future, the company is expected to form a core product portfolio of five mid-to-large and large SUVs, further strengthening its competitiveness in the high-end SUV market.

The report states that product structure optimization is expected to offset cost pressures, with profitability continuing to improve. Large SUV models have relatively high gross margins, which are expected to support the overall gross margin level amid upward pressure on raw material costs. Coupled with sales growth and continuous improvement in expense efficiency, the company's non-GAAP operating profit is expected to turn positive for the full year in 2026, and free cash flow is also expected to continue to improve