Morgan Stanley: Gives NIO-SW (09866) an "Overweight" rating with a target price of HK$68.5

Morgan Stanley released a research report stating that NIO-SW (09866) management reiterated that the company will prioritize profit growth through sales volume growth and operating leverage, and reaffirmed its goal of achieving non-GAAP adjusted profitability this year. The bank gives NIO's H-shares an "Overweight" rating with a target price of HK$68.5. The bank noted that the company expects to stabilize vehicle gross margin at around 18% through efficiency improvements. Meanwhile, selling, general and administrative expenses as a percentage of revenue are expected to drop to 10% to 11% in the second half of the year, and fall below 10% in the long term; non-GAAP R&D expenses are expected to remain at approximately RMB 2.5 billion per quarter. The bank believes that NIO's balance sheet financing pressure has been eliminated, and expects cash and equivalents to exceed RMB 60 billion in (the third quarter), and exceed RMB 70 billion next year. The battery swapping business is expected to approach break-even within three years.