Nio among CGS-CIMB’s picks for EV sector

ELECTRIC vehicle (EV) company Nio was among the top picks for CGS-CIMB in a research note published on Tuesday (Aug 2) about the growth potential in the new energy vehicle market in China and globally.

The brokerage’s optimism on the EV market in China comes from the country’s slew of supportive government policies and nationwide EV infrastructure expansion, which analyst Ray Kwok believes would poise the market for a rapid growth trajectory over the next decade.

He opined that Nio, along with XPeng Motors and Li Auto, were well positioned to gain market share on the back of launches of smart EVs with rich connectivity features, manufacturing capabilities for vehicle systems and improving battery technologies.

CGS-CIMB initiated coverage on China’s smart EV sector with an “overweight” call. Nio received an “add” rating with a target price of HK$257.30.

Kwok estimates Nio’s compound annual growth rate for EV deliveries to reach 59 per cent between FY2021 and FY2024. He noted that its EV deliveries touched a record high of 91,000 in FY2021, while its H1 2022 EV deliveries rose 21 per cent despite China’s Covid-19 wave and a sustained chips shortage. 

“We recommend Nio for its renowned brand name and growing market share in China’s premium EV market,” said the analyst.

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Downside risks for the sector include a prolonged Covid-19 outbreak in China, sustained supply chain constraints and keener competition from foreign automakers.

Nio ’s shares were trading up 1.9 per cent or US$0.37 higher at US$20.23 as at 1.25 pm on the Singapore bourse.