Is Nio (NYSE:NIO) planning to become more self-sufficient? Last week, Anhui Jianghuai Automobile Group (JAC) announced plans to sell factory assets with a net book value worth of RMB 4.2 billion (~$574 million) and an evaluated value of about RMB 4.5 billion (~$615 million). Amongst the assets are two factories where it manufactures vehicles for Nio.
While no buyer of the assets has yet to be confirmed, according to the rumor mill, the Chinese EV maker might be eyeing a purchase of the assets although neither company has yet to comment on such reports.
Mulling over that prospect, Morgan Stanley analyst Tim Hsiao believes it could make “strategic sense for NIO to assess potential investments related to the F1 and F2 plants.”
“On balance,” the analyst went on to say, “we consider this transaction to be strategically positive for NIO. If NIO were to gain greater control over production, it could better mitigate the risks associated with supply chain disruptions and production hiccups in future, as well as enhancing overall operational efficiency and stability. In the meanwhile, the production permit associated with the plants is also of value.”
Hsiao reckons the plants could be worth around RMB 1.3-1.7 billion (~$177.6 – $232.3 million), and based on NIO’s current net cash balance of approximately RMB 24 billion (~$3.28 billion), as well as the recent injections of US$738.5 million in funding from CYVN Holdings and an additional US$1 billion from a recent convertible bond issuance, the analyst believes that any potential investment made would likely have a minimal effect on both NIO’s net cash position and its operations as 2024 comes into the frame.
“That said,” Hsiao adds, “amid lingering concerns about NIO’s cash flow, investors are likely to focus on whether NIO can narrow its cash burn rate sufficiently from 3Q by improving scale and working capital.”
All told, Hsiao rates NIO shares an Overweight (i.e., Buy) along with an $18.7 price target, indicating shares could surge 147% over the next year. (To watch Hsiao’s track record, click here)
The Street’s average target is not quite as exuberant but still offers plenty of gains. At $14.24, the figure suggests one-year upside of 88%. Based on a mix of 6 Buys and 4 Holds, the analyst consensus rates the shares a Moderate Buy. (See Nio stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
