NIU Technologies (NIU.OQ) 1Q23 result in line; Outperform on strategic adjustments

Asian Daily

 

Maintain OUTPERFORM

Previous Rating: OUTPERFORM

Target price (US$): 6.50

Previous target price (US$): 6.50

• NIU Technologies reported 1Q23 net loss of Rmb60.3mn, up by 104% YoY and 63% QoQ. The main reasons: (1) ~42% decline in

1Q23 sales volume, which resulted in ~28% decline in sale revenue; and (2) one-off credit loss of  

 

Rmb21.3mn, which accounted for 5% of total 1Q23 revenue, leading to 102% YoY increase in general and  

administration expense.

• The domestic ASP of 1Q23 was Rmb3,743, going up by 21.8% YoY, mainly because (1) The company raised its price from 2Q22 to

an overall average ASP of Rmb3,557; (2) The company successfully optimized product mix.

• The number of stores decreased meaningfully to 2,853, from 3,102 in 4Q22. The closed 249 stores, 60%, mostly in Tier-1 cities, were

combined to improve store efficiency, and the other 40%, mostly in Tier-3 cities, were closed permanently.

• We maintain our Outperform rating on new products to be launched in late 2Q and 3Q, improved gross margin (stable at ~22%) and

effective cost control.

 

NIU's net loss expanded to Rmb60.3mn, due to ~42% decline in 1Q23 sales volume and a one-off  

credit  

loss of Rmb21.3mn. The credit loss was derived from extended credit terms with the dealer in 

Europe,  

which is suffering prolonged retail downturn. Excluding the credit loss, 1Q23 was flat QoQ.

 

1Q23 ASP reflected the company's strategy to optimize product mix—NIU lowered the share of 

low-priced Gova series by ~7 pp YoY and expanded the sales volume of high-priced SQi (ASP at

 

~Rmb7,500, twice of other high-priced models) to ~5,000 units in 1Q23. SQi is an award-winning 

 

 

product that has been well received by the market, proving NIU's sense of customer needs.

 

NIU's cost control measures start to take effect. R&D costs decreased by 16% YoY and 13% QoQ,  

owing to efforts such as usage of universal software platform for all products and internalizing 

some  

projects that were outsourced in the past. The number of R&D staff has remained stable. 

Management 

guided that FY23 expense rate is at 16-18% of revenue.

 

Meanwhile, we expect margin improvement on failing lithium price.

Lithium carbonate price dropped 27% QoQ to Rmb180k per ton by end-Apr 2023, 56% lower than 

1Q22's average price level. This will narrow down the cost gap with other brands featuring low-priced 

lead acid products.

Figure 2: New products launched on 10-May-2023

 

Source: Company website

NIU launched several new products on 10-May-2023, which have been well received by the market.  

MQiL is a premium electric scooter with

 

~170km riding range, super charging function, and multiple smart features including full integration 

 

with Apple ecosystem, which allows users to control it with Apple watch. MQiL is priced at  

 

Rmb4,999-Rmb8,299 and the company has received more than 15,000 orders. Majority of the overall 

 

sales (~60%) will be in 3Q and 4Q of 2023 since other new products launched are planned in late 2Q  

 

and 3Q. Considering delivery and sales recognition, 3Q and 4Q will be the high seasons.