Disappointing Q4 Vehicle Margin at Nio on One-Off Charges; FVE Lowered to USD 15.50

Nio’s fourth-quarter vehicle margin declined 14 percentage points year over year to 6.8% due to: 1) inventory provisions and losses on purchase commitments related to last-generation ES8, ES6 and EC6 models that are scheduled to be phased out; and 2) rise in battery cost. Management indicated that vehicle margin would stage a sequential recovery in the second half this year on better product mix. With enlarged losses on softer vehicle margin, we slightly increase our net loss forecast for 2023-24. We reduce our fair value estimate to USD 15.50 per ADS (HKD 120 per share) from USD 16.00 per ADS (HKD 126 per share). Our fair value implies a forward price/sales ratio of 2.1 times.