CICC: Maintains NEXTEER (01316) Outperform Rating, Raises Target Price to HK$8.4

CICC released a research report stating that it basically maintains NEXTEER's (01316) net profit forecast for 2025/2026. The current stock price corresponds to 12.6x/9.9x 25E/26E P/E. It maintains an outperform rating in the industry. The automotive intelligentization sector is hot, and the company's profit margin is entering a recovery cycle. The target price has been raised by 17% to HK$8.4, corresponding to 15x/12x 25E/26E P/E, with a 21% upside potential compared to the current price. The company announced its 1H25 performance, with operating income of $2.242 billion, a year-on-year increase of +6.8%; net profit attributable to the parent company was $63.48 million, a year-on-year increase of 3 times; and a net profit margin of 2.8%, which is a new high since 2023. CICC's main points are as follows: Revenue growth outperforms the light vehicle sales growth in various regional markets, with many popular vehicle projects in production. In terms of regions, the revenue in North America/Asia Pacific/EMEASA regions in 1H25 was $1.14/0.69/0.40 billion, with year-on-year growth rates of +1.7%/+15.5%/+9.4%, and the revenues in China and EMEASA regions maintained relatively high growth rates, with projects such as Xiaomi YU7, North American EV leader SUV models, Xiaopeng G9, BYD Company Limited's sea lion 06 project coming into production. In terms of business segments, the revenues for EPS/CIS/HPS/DL business in 1H25 were $1.53/0.23/0.09/0.40 billion, with year-on-year growth rates of +8.6%/+2.9%/+1.7%/+3.8%. Gross margin improves both year-on-year and quarter-on-quarter, while expenses steadily decline. The gross margin in 1H25 was 11.5%, a year-on-year increase of +1.5ppt and a quarter-on-quarter increase of +0.6ppt, mainly driven by revenue growth and improved operational efficiency. In terms of regions, the EBITDA margins in North America/Asia Pacific/EMEASA regions in 1H25 were 7.6%/16.9%/8.8%, with year-on-year changes of -0.2/-0.8/+6.7ppt and quarter-on-quarter changes of -0.9/stable/+0.6ppt. The decline in North America's margin both year-on-year and quarter-on-quarter was mainly due to tariff and supply chain issues. EMEASA region had a lower base due to the Brazil flood impact during the same period. The company's R&D/sales/management expenses in 1H25 were $75.39/10.70/81.47 million, with year-on-year changes of -14.9%/-0.8%/+13.8%, showing a stable decline in expenses. The decline in R&D expenses was mainly due to the decrease in intangible asset impairment expenses related to cancelled customer projects. The effective tax rate in 1H25 was 28%, a year-on-year decrease of -15.6% and a quarter-on-quarter decrease of -4ppt.