According to the report released by Anxin International, Nexteer (01316) is given a "buy" rating, and is believed to be a leading company in the field of steering gears. It is predicted that the net income attributable to the owner of the company will be RMB 130 million, RMB 170 million and RMB 220 million for 2024-2026, with a year-on-year growth of 261%, 31% and 29%, and a target price of HKD 7.

Anxin International's main points are as follows:

A century-old enterprise with diverse clients and a complete product matrix.

Nexteer was founded in the United States in 1906 and has been developing in the field of steering gears and power transmission systems for over 100 years. The company's products include Electric Power Steering (EPS), Column-Integrated Steering (CIS), Driveline (DL), Hydraulic Power Steering (HPS), Steer-by-Wire (SBW), eDrive and software solutions. Its clients cover almost all major automakers including BMW, BYD, Changan Automobile, Ford, General Motors, Renault, SAIC-GM-Wuling, Toyota, Volkswagen, Great Wall Motor, Li Auto Inc, and Xpeng Inc., with more than 60 clients. In terms of regional distribution, the North American market is the cornerstone of the company's revenue, and the Chinese market is developing rapidly, driving performance growth.

Steer-by-Wire (SBW) is an advanced product of Electric Power Steering (EPS) and is highly related to autonomous driving. As a representative of Nexteer, the top tier1 has strong technological and first-mover advantages. In the first half of 2022, Nexteer won its first order for SBW from a global leading OEM in Germany, with a total order volume of USD 2 billion, which is regarded as the first in the industry. We believe that Chinese automakers have invested heavily in autonomous driving and are developing rapidly. Nexteer has established research cooperation with several domestic brands in SBW and the number of orders for SBW in China will increase gradually in the future, and commercial landing will promote industry development.

With the core symbol of Steer-by-Wire (SBW), Nexteer can follow the trend of the industry upgrading. As an advanced product of Electric Power Steering (EPS), it is highly related to autonomous driving. Tier1 companies, represented by Nexteer, have strong technological advantages and first-mover advantage. In the first half of 2022, Nexteer received an SBW order worth USD 2 billion from a global leading automaker in Germany, which is the first in the industry. We believe that Chinese automakers have invested heavily in autonomous driving and are developing rapidly. Nexteer has established research cooperation with several domestic brands in SBW and the number of orders for SBW in China will increase gradually in the future, leading to commercial landing and industry development promotion.

With multiple orders in hand, Nexteer has reached cooperation with Tesla for the first time.

In 2023, the company receives USD 6.1 billion worth of orders, and many of them are milestone orders. In the first half of 2023, the company received a second order for SBW, including Hand Control Actuator, Wheel Control Actuator and Software Integration System. In the second half of 2023, the company received its first EPS order from a global electric vehicle leader. We speculate that Nexteer has obtained the North American order of Tesla Model Q, and is expected to deepen cooperation and obtain Model Q orders in Europe and China in the future. Strong order volume and project production are expected to further drive revenue growth.

Risk warning: Industry competition intensifies; prices are lower than expected; deterioration of Sino-US trade relations.