Niu Technologies: Strong Growth Momentum and Positive Outlook for International Expansion

Niu Technologies (NASDAQ: NIU) has shown robust growth in Q2 2024, with notable increases in unit sales both domestically and internationally. This positive trend, coupled with strategic plans to expand in overseas markets, has led to a revised rating of the stock from Hold to Buy, with expectations for the stock to trade at a higher P/E multiple in the mid-teens range.

Q2 2024 Sales Performance

Niu Technologies reported impressive sales figures for Q2 2024:

• Total units sold increased by +21% YoY and +98% QoQ, reaching 256,152 units.
• Domestic sales in China grew by +16% YoY and +88% QoQ to 207,522 units.
• Overseas sales surged by +156% QoQ and +45% YoY to 48,610 units.

The company’s success in China is largely attributed to new product offerings, particularly the new NXT model, which became the best-selling new electric bicycle during China’s 618 shopping festival.

International Market Expansion

Niu Technologies is actively expanding its international presence. Key developments include:

• A significant retail expansion to over 800 Best Buy stores in the United States.
• Plans to double its international retail footprint by the end of 2024, targeting major retailers such as Costco, Walmart, Lowe’s, and Home Depot.

The company’s efforts to optimize its product portfolio for international markets have already yielded positive results, with a +50% YoY increase in units sold for micro-mobility offerings in overseas markets.

Growth Potential and Investment Thesis

Niu Technologies’ strong sales momentum and strategic international expansion present a compelling growth story:

• The global market for electric two-wheelers outside China is projected to grow at a +25.6% CAGR from 2023-2027.
• Currently, only 15% of Niu Technologies’ sales come from overseas markets, indicating significant room for growth.

Despite its promising outlook, Niu Technologies trades at a relatively low valuation. The stock’s consensus next twelve months’ normalized P/E is at the low-teens level (approximately 12 times), which is lower than its peers and historical averages. With a consensus FY 2023-2025 top-line CAGR forecast of +25%, the stock is undervalued.

Comparative Valuation

Niu Technologies’ peers are valued at higher P/E ratios:

• Luyuan Group: 14 times
• Zhejiang Qianjiang Motorcycle: 16 times
• Zhejiang Cfmoto Power: 19 times

Niu Technologies’ historical three-year mean P/E is 14 times, suggesting that the stock is currently undervalued and has the potential to re-rate to the mid-teens level.

Risks

Key risks to consider include:

• Potential weakening of China’s economy, which could reduce consumer spending on discretionary items like electric bikes.
• Challenges in expanding the distribution network and securing new retail partners, which could impact overseas sales growth.

Conclusion

Niu Technologies has demonstrated strong growth momentum with a positive outlook for international expansion. The company’s current undervaluation, combined with its growth potential, makes it an attractive investment opportunity. Therefore, the stock is rated as a Buy, with expectations for its P/E multiple to re-rate to the mid-teens level, in line with its peers and historical averages.