In view of favorable industry trends, we adjusted the target price of Lijin Technology (the “Company”) to HK$4.45 and raised the investment rating to “buy”. The company's long-term growth potential remains strong, and we expect short-term operating results to improve. As a result, we raised our net profit forecast for the 2024-2026 fiscal year to HK$526 million/HK$621 million/HK$702 million, respectively. We expect the company's earnings per share for the 2024-2026 fiscal year to be HK$0.382, HK$0.451 and HK$0.510, respectively. Our target price is equivalent to 11.6 times/9.9 times/8.7 times the 2024-2026 price-earnings ratio and 1.2 times the FY2024 net price-earnings ratio.

Lijin Technology is expected to benefit from three industry trends: 1) The company will benefit from Tesla's increase in capital expenditure and expansion into large electric vehicle models. Accordingly, the company is also expanding its international production sites in the US, Germany, Mexico, and India to meet growing overseas demand. 2) The easing of the price war among Chinese NEV manufacturers and government support policies are expected to re-boost the capital expenditure of the electric vehicle industry. 3) With the implementation of China's “Action Plan to Promote Trade-in of Consumer Goods”, demand for home appliances is expected to increase, and the revenue of Lijin Technology's injection molding machine sector is expected to increase.

Risks: Geopolitical frictions that exceed expectations, new energy vehicle manufacturers cut further prices, and reduced capital expenditure.