Citi cuts NIU Technologies target to $2 on weak FY23 results

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On Monday, Citi adjusted its outlook on NIU Technologies (NASDAQ:NIU), a company known for its electric two-wheeled vehicles (E2W). The firm reduced the price target to $2.00 from the previous $2.40, while keeping a Neutral rating on the stock. This decision came after NIU Technologies reported its financial outcomes for the fiscal year 2023, which did not meet expectations.

The company experienced a significant year-over-year (YoY) revenue drop of 16%, totaling Rmb2,652 million. Moreover, the net loss for the year was reported at Rmb272 million, a stark contrast to the Rmb9 million profit from the previous fiscal year. These figures fell short of both market predictions and Citi’s own forecasts.

In the fourth quarter of 2023 alone, NIU saw a 22% YoY and 48% quarter-over-quarter (QoQ) decline in revenue, amounting to Rmb479 million. The net loss for the quarter widened dramatically by 251% YoY and 64% QoQ to Rmb130 million. The disappointing quarter was attributed to several factors, including a 1% YoY and 48% QoQ decline in E2W sales volume, as well as a 22% YoY and 4% QoQ drop in the average selling price (ASP) of E2W. These declines were linked to the broader global economic downturn, a slowdown in consumer spending, and the company’s shift towards more premium products.

Additional challenges faced by NIU included a sharp margin contraction. This was due to a shift in product mix and reduced economies of scale, which negatively impacted profitability. Despite a slight recovery in the sales network, with an increase of 22 stores QoQ, the full year saw a net reduction of 246 stores, indicating a challenging retail environment for the company.

The financial performance of NIU Technologies in the past fiscal year and the last quarter reflects the impact of global market conditions and strategic choices on the company’s bottom line. With the adjusted price target, Citi signals caution to investors regarding the company’s near-term prospects.

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