Company Name: NIU Technologies
Entry Price: $38.40
Target Price: $52.00
Projected Yield: 35.4%
Time Line: 3 to 6 months
Position Size: 2%
About NIU Technologies
NIU Technologies (NIU.US) is one of the largest manufacturers of electric bikes, scooters and motorbikes in China. Among other things, NIU customers can use the app to synchronize their vehicle with a cloud system to fetch real time information about it.
You can view our previous investment idea of NIU here. This idea already got successful, but now we are updating it, as the company news emerged and Q3 and Q4 2020 results were published.
What's the Idea?
Capitalize on a stock that may rise with the growing popularity of electric scooters and changes in the Indonesian legislation.
Buy NIU Technologies Shares >>
Why Trade NIU Technologies?
Reason 1: Boost of Sales
Electric vehicles are becoming more in-demand, and this helped NIU aggressively expand its share in the electric scooter market. Within Q3 2020, the number of stores where one can buy a NIU vehicle increased by 182, to reach 1,266.
Overseas, the company now has 36 distributors. The sales over 2020 came it 600.9K items, a massive 42.60% increase compared to 2019.
Only 4.80% account for overseas markers, while the rest stands for China. NIU is heavily trying to increase its global market share; however, the lockdown damaged the economic activity, which made the overseas sales decrease by 0.50%. At the same time, in Q4 2020, the performance got much better, with +179% in foreign sales against the same period of 2019.
NIU has 20% in the Chinese market, the management reports, which means the company was able to adjust to the new conditions with timely supply chains, an efficient ecommerce platform, and operational activity optimization. Good performance is expected in the midterm, too, as the overseas presence is here to stay.
Reason 2: Expansion to the Indonesian Market
Expanding to Indonesia may well help NIU achieve good results. The company started marketing its products there last year, having opened a central store. The next step is increasing the distribution network and offer the entire range of products to the Indonesian customers.
Indonesia is a good place to sell motorbikes, as it is the world's third market for two-wheeled vehicles, being behind only China and India. This market may reach $10B by 2025, Research and Markets report, while the electric scooter share is expected at $816M against $364M in 2019, with an annual growth of 21%.
Nevertheless, even such a daring projection may get beaten by the actual figures because of the new legislation in Indonesia intended to stimulate electric vehicle usage. This is quite understandable, as this should lead to both sustainable energy and lower pollution. As such, electric vehicles should reach 20% of the total market share by 2025, as per the Indonesian government. At the same time, NIU management believes that NIU's products may well solve both the pollution and the traffic issue in Indonesia.
Reason 3: Financial Performance
So far, the company has provided Q3 report only, which was quite positive, while the Q4 report is being released on March 8. Since early this year, NIU earnings in USD went up by 21%, while the operating profit margin decreased from 6.90% to 6.10%, and net profit margin, from 8.40% to 6.20%.
The margin dropped due to an increase in R&D and administrative costs, as well as new product promotion. Good workflow management and better operation activities will help resolve this issue, the company admits. The financial position is meanwhile stable: the amount of debt obligations is $26.50M, while the liquidity amounts to $191.60M, which means the company has enough cash to expand and promote its products.
The ratios are as follows: EV/S at 6.7x, PE at 110x, and Forward PE, at 44x.
The PE is especially high, but yet acceptable compared to the competition. With more margin, it should get more stable as well. In the meantime, the EV/S is very good for a company that is growing so rapidly.
Early this year, Needham & Co issued a new target price for NIU shares, namely $46.
This investment idea is highly risky, as NIU is releasing its Q4 report on March 8, and the price may well go down in case the expectations are not met. A reverse situation is also possible. In order to avoid high risks, we recommend you buying NIU shares only after the report has been released.
How to Use the Idea
- Buy NIU Technologies at $38.40.
- Allocate no more than 2% of your portfolio for the transaction. To build a balanced portfolio, you can use the recommendations by our analysts.
- Sell the stock when the price reaches $52.
How to Buy NIU Technologies Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: : In the Web Terminal section, type NIU.US (NIU Technologies ticker in the NASDAQ) in the search box, and select NIU Technologies in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type NIU.US (NIU Technologies ticker in the NASDAQ) and select NIU Technologies in the search results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy NIU Technologies Shares >>
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