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Is Niu Technologies Ready To Charge Ahead Again?

The Bamboo Works
April 11, 2024

Key Takeaways:

  • Niu Technologies said its unit sales at home and abroad rose more than 30% in the first quarter, following a tough 2023 when its revenue fell 16%
  • The electric scooter maker’s shares jumped 34% from an all-time low in the week following the announcement

By Edith Terry

Niu Technologies (NASDAQ:NIU) has had some rough years since the heady days of its Nasdaq listing in October 2018. In 2017, the company, whose name means “bull,” was China’s top seller of lithium-ion battery powered e-scooters, with 26% of the market by unit sales and 39.5% by value. It was third in Europe as well, with 11.1% of the market by unit sales. Its sales zoomed over the next few years, rising from 189,467 e-scooters in 2017 to over 1 million in 2021.

But the growth began to slow after that and slipped into reverse, even as expansion at its factory in the city of Changzhou boosted its annual capacity to 2 million scooters. In 2023, it was back to 710,000 in annual unit sales, down 15% from 2022, as the broader market for e-scooters fell, partly as a result of price increases for battery packs as lithium prices soared. Lithium prices began to retreat in the second half of 2023, but Niu was still forced to shutter 500 stores, reducing its network to 2,856 domestic outlets by the end of last year.

So, the company’s report last week of a sharp bounce-back in first quarter sales, both at home and overseas, sparked a 34% rally for its shares in the following days, providing a much-needed jumpstart to its sputtering story. Niu said its unit sales in China rose 35% year-on-year in the first quarter to 110,115 units, while overseas sales, mostly in Europe, powered ahead by 48% to 19,024 units.

Niu said that its premium NXT e-bike, released in February, was responsible for 26% of its domestic sales during the quarter. Within two weeks of the release, the model had 10,000 pre-sale orders, according to the company. The company credited its strong international gains to “our comprehensive product line-up” and progress in its retail channel expansion.

“We expect to regain growth momentum in 2024, propelled by new models and expanding sales channels,” the company said. “Our unwavering confidence in reclaiming growth underscores our commitment to industry leadership.” For the year, Niu anticipates sales of 1 million to 1.2 million units, CEO Li Yan said on the company’s earnings call in March after the release of its fourth quarter and full-year 2023 results.

On the same call, CFO Fion Zhou said the company expects to report revenue growth of about 10% in the first quarter, far less than the unit sales growth announced last week. That implies its average selling prices were down year-on-year amid stiff competition both in China and abroad, continuing a trend from last year.

Investors were more focused on the return to growth in the latest announcement and may also be pleased with what they see in Niu’s strategic plans. Together with the NXT, two other launches in February for the company’s NX e-scooter and X3 smart off-road electric motorcycle, mark a strategic shift toward premium products to offset weak consumer spending. CEO Li told financial publication Yicai that while his rivals would likely cut prices, Niu would stay on course to get out of the overheated lower end of the market by moving upmarket.

Big addressable market

Li said on the fourth-quarter earnings call that China’s addressable market for more upscale scooters priced above 3,500 yuan ($484) was 14 million to 16 million units last year, even though Niu only sold about 600,000 units in that category.

In addition to going upscale, Niu is planning to return to expansion mode with plans to open 1,000 to 2,000 stores domestically this year and experiment with direct distribution to retailers overseas, which it believes will help build brand loyalty. It is also working on branding and marketing programs, from livestreaming to a joint effort with JD Gaming, a leading e-sports team in China and a finalist in the League of Legends World 2023.

The return to growth looks good, but can Niu sustain a broader turnaround this year? Its last earnings report for last year’s fourth quarter and all 2023 has plenty of room for improvement. The company’s fourth-quarter revenue fell 21.8% year-on-year to 478.7 million yuan, while its gross margin fell from 22.5% to 19% over that period. Niu reported a net loss for the quarter of 130.2 million yuan in 2023, widening from a 37.1 million yuan loss in 2022.

Its full-year revenue of 2.6 billion yuan was down 16.3% from 2022, and its gross margin of 21.5% last year rose slightly from the 21.1% for 2022, with the small increase due to the launch of new premium products in China. Its annual net loss widened from 49.5 million yuan in 2022 to 271.8 million yuan in 2023.

While the latest data shows Niu’s revenue per scooter continued to fall in the first quarter, one promising sign is that the rate of the declines seems to be levelling off from even sharper declines in 2023. In last year’s fourth quarter, its average revenue of 3,482 per scooter was down 21% from a year earlier.

All in all, Niu seems to be starting to deliver on its promise to go more upmarket, and is navigating a difficult market as best it can. Its market cap of $176 million and price to sales (P/S) ratio of 0.36 puts it on a par with Ninebot (689009.SS), owner of the iconic Segway scooter brand, which has a market cap of $272.3 million and a 0.36 P/S ratio. Both of those are behind Piaggio & C. SpA(PIA.MI), maker of more established and equally iconic Vespa brand scooters, though its 0.52 P/S ratio is nothing to get too excited about. Unlike Niu, both Ninebot and Piaggio are in the black.

Four analysts surveyed by Yahoo Finance were split between “buy” and “hold” recommendations for Niu in recent months. But in a positive sign, they shifted to “buy” and “strong buy” this month as the company returns to growth. Two analysts who submitted financial forecasts also expect the company to return to a profit this year.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.

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