BOCOM INTL maintains a buy rating on NIO-SW (09866) with a target price of 65.83 Hong Kong dollars.

BOCOM INTL released a research report, maintaining a buy rating on NIO-SW (09866) with a target price of HK$65.83. The core significance of this quarter is that NIO has entered a stage of operational verification with sales volume recovery leading to improvement in ASP, stable gross profit margin, and contraction in expense ratio. In the short term, the focus will be on the realization of the targets set for 2Q26, which include climbing deliveries in June and conversion of ES9 and L80 orders. In the medium term, the market will pay more attention to the proportion of high-margin vehicle models, whether the target of 17% to 18% for vehicle gross profit margin can be maintained under cost pressure, and the continuity of Non-GAAP operating profit. If the ES9, ES8 five-seater version, and L80 continue to perform well, the key to revaluing the company's worth will shift to the continuity of operating profit and visibility of cash flow. BOCOM INTL's main points are as follows: NIO's performance in 1Q26 significantly exceeded market expectations NIO delivered 83,465 vehicles in 1Q26, an increase of 98.3% year-on-year; revenues were RMB 25.33 billion, up 112.2% year-on-year; vehicle sales revenue was RMB 22.84 billion, up 129.2% year-on-year; Non-GAAP adjusted operating profit was RMB 0.67 billion, and adjusted net profit was RMB 0.44 billion. Calculated based on vehicle sales revenue/delivery volume, the ASP for whole vehicles in 1Q26 was around RMB 273,000, up 15.6% year-on-year and 7.8% quarter-on-quarter. Profit improvement is not solely due to the increase in sales volume; rather, it is driven by the increase in the proportion of high-margin ES8, rising ASP, and strengthened cost discipline: R&D expenses were RMB 1.85 billion, down 40.7% year-on-year and 7.0% quarter-on-quarter; SG&A expenses were RMB 3.497 billion, down 20.5% year-on-year and 1.1% quarter-on-quarter; the combined total of the two expenses was RMB 5.382 billion, a reduction of approximately RMB 2.20 billion year-on-year. Vehicle gross profit margin was 18.8%, up 8.6 percentage points year-on-year and 0.7 percentage points quarter-on-quarter; other sales gross profit margin was 20.6%, reaching a four-year high, reflecting the improvement in profitability of service, energy, and community-related businesses, with revenue largely meeting market expectations and profit quality being better than market concerns. Management guided for 2Q26 deliveries of 110,000-115,000 vehicles, a year-on-year increase of 52.7%-59.6%; revenues of RMB 32.777-34.336 billion, a year-on-year increase of 72.4%-81.2%, with corresponding ASP for 2Q26 vehicles at RMB 26.5-26.6 thousand, maintaining stability. In terms of delivery pace, the guidance for 2Q26 corresponds to a total of 80,644-85,644 vehicles still needing to be delivered in May and June, with a monthly average of 40,322-42,822 vehicles, an increase of approximately 37%-46% from April. If May is close to the level of April, then around 51,000-56,000 vehicles need to be delivered in June, an increase of 75%-92% from the average of April and May, making climbing deliveries in June a key factor in achieving the guidance. Catalysts include the launch of the ES9 on May 27, increased deliveries of the L80, the launch of the ES8 five-seater version in the second half of the year, and the upgrade of NIOWorldModel in June. The main risks include price wars, rising costs of raw materials/memory/battery materials, cost pressures exceeding RMB 10,000 per vehicle, and slower-than-expected brand recognition of Ludoa.