1,000 New Stores And Product Lines Will Expand Reach

Key Takeaways

• Expanding retail presence and innovative products are key strategies for boosting sales and enhancing revenue and margins.
  
• International market expansion, supply chain optimization, and branding initiatives focus on increasing revenue and improving profitability.
  
• Escalating tariffs and intense competition in the electric vehicle market threaten Niu Technologies' profitability, with uncertainties in future earnings potentially impacting investor confidence.

Catalysts

Designs, manufactures, and sells electric scooters in the People's Republic of China, Europe, and internationally.

• Niu Technologies is focusing on expanding their retail footprint with plans to open 1,000 to 1,500 new stores in 2025, particularly targeting Tier 3 cities in China, which is expected to drive sales volume growth and positively impact revenue.
  
• The company is investing in product innovation with the introduction of new product series like NX, NXT, and FX, and adding smart technologies to their lineup, which could increase consumer demand and subsequently enhance revenues and potential margins.
  
• Strategic initiatives focused on branding, including collaborations with popular mobile games and extensive social media outreach, are aimed at increasing brand recognition and engagement, potentially leading to higher sales and increased market share, impacting revenue growth.
  
• Efforts to establish direct distribution operations in international markets and expanding dealer networks can boost overseas sales, potentially increasing Niu's revenue and decreasing unit costs, possibly improving net margins over time.
  
• Supply chain optimization and production diversification, such as shifting some production to Southeast Asia, aim to mitigate tariff impacts and reduce costs, helping to restore profitability and positively affecting earnings.

Niu Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Niu Technologies's revenue will grow by 34.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.9% today to 6.3% in 3 years time.
• Analysts expect earnings to reach CN¥496.0 million (and earnings per share of CN¥6.4) by about April 2028, up from CN¥-193.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting CN¥584 million in earnings, and the most bearish expecting CN¥408 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.2x on those 2028 earnings, up from -10.4x today. This future PE is lower than the current PE for the US Auto industry at 19.4x.
• Analysts expect the number of shares outstanding to decline by 1.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.18%, as per the Simply Wall St company report.

Niu Technologies Future Earnings Per Share Growth

Risks

• The increased U.S. tariffs on products exported from China, which rose from 0% to 25% in 2024, have eroded margins, leading to negative gross margins on certain products and directly impacting profitability.
  
• The projected profitability of the kick scooter segment, which previously faced high tariffs and resulting losses, poses a potential risk if market conditions or tariff levels change unfavorably again, impacting net margins.
  
• There is significant competition in the electric two-wheeler market, both domestically and internationally, which may pressure Niu to increase marketing spend and reduce prices, potentially lowering net earnings.
  
• Profitability was affected in 2024 due to strategic price adjustments to gain market share, and future attempts to regain margin support provided to distributors may not succeed without impacting sales volume, which could influence net income.
  
• Although optimistic about future growth, there is a lack of clear profit guidance for 2025, indicating potential uncertainties around achieving profitability goals, which might affect investor confidence and long-term earnings projections.

Valuation

• The analysts have a consensus price target of $4.494 for Niu Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $5.76, and the most bearish reporting a price target of just $3.58.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CN¥7.9 billion, earnings will come to CN¥496.0 million, and it would be trading on a PE ratio of 7.2x, assuming you use a discount rate of 13.2%.
  
• Given the current share price of $3.52, the analyst price target of $4.49 is 21.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.