According to the China Intelligence APP, CMB International has released a research report stating that it has initiated coverage of Minth Group (00425) and given it a 'buy' rating, predicting that from 2024 to 2026, revenue will increase by 19%, 15%, and 13% year on year, up to 24.3 billion, 27.9 billion, and 31.6 billion yuan, respectively. Net income is expected to increase by 18%, 14%, and 13% to 2.2 billion, 2.6 billion, and 2.9 billion yuan, respectively, with a target price of HKD 21. The bank expects to resume dividends when cash flow improves in the 2024 annual report. Currently, Minth's valuation has already fallen to a historical low. The bank believes that investors may underestimate Minth's global manufacturing and profitability capabilities amid the increasing geopolitical risks.

CMB International's main points are as follows:

Solid overseas foundation is the driving force of the company's revenue and profit.

The bank believes that China's car companies going overseas is an inevitable trend, and with the increase in overseas trade risks and localization supply demands, Minth has an advantage over most of the Chinese auto parts suppliers who are just going overseas or still losing money overseas with nearly 20 years of overseas experience. Minth's main overseas factories (in Mexico, Serbia, USA, etc.) have already achieved profitability and are expected to contribute about 10% to Minth's net income in 2023. The bank predicts that the net profit of overseas factories will double from its 2023 basis by 2026. The bank believes that Chinese car companies will also bring new business to Minth in order to avoid high tariffs or increase local production in Europe.

There is still room for growth in the battery box business.

Although the bank expects the unit price of battery boxes to gradually decrease over time, the bank believes that Minth Group's battery box business still has huge growth potential, as the global penetration rate of electric vehicles increases and Minth Group's potential market share in the battery box field increases. The bank expects Minth Group's battery box revenue to grow by 60%/35%/30% respectively from 2024 to 2026, which is higher than the growth rate of global electric vehicle sales. With the ramp-up of factories in Serbia and the Czech Republic, the bank expects the gross margin of the battery box business to continue to improve. At the same time, the battery box business has become a springboard for Minth Group to extend its business to automotive chassis structural parts. The revenue from chassis structural parts at the end of 2023 will contribute 10% to the revenue of Minth Group's battery box BU, and it will continue to increase in the future.