~Bank of China International Research report points out that the overall stock price of the automobile industry in Hong Kong has lagged behind various fundamental indicators since the beginning of the year, and believes that the difference is mainly due to market pessimism about the macro market and the automobile industry. The bank believes that entering the fourth quarter of this year, which is also the traditional peak season for automobiles, the industry valuation will rebound significantly under the drive of contract manufacturers with strong product cycles and historical low valuations. The bank is bullish on Xiaomi (01810.HK), Geely (00175.HK), and NIO (09866.HK), as for Li Auto (02015.HK), although it lacks short-term catalysts, it is still optimistic about its long-term growth prospects.
The bank reiterates its "buy" rating for Xiaomi and believes that the launch of new products in late October will be the next catalyst, with monthly deliveries expected to exceed 0.02 million units in the fourth quarter and a promotional campaign for the next electric vehicle product to be launched in early 2025. The bank also maintains a "buy" rating for Geely and expects that the upward revision of profit forecasts in the market will help drive its valuation recovery. Short-term catalysts include market reactions to flagship models in the second half of the year and ongoing operational integration at the group level. As for NIO, the bank expects that despite the higher short-term quarterly losses, driven by a strong new product cycle, there will be a meaningful narrowing of losses and improvement in cash flow, maintaining a "buy" rating with a target price of $9.
As for BYD (01211.HK) and Brilliance China (01114.HK), the bank believes that close attention needs to be paid to the slower upscale progress of BYD since the beginning of the year, competition from new energy automobile companies, and the company's monthly sales data, maintaining its "buy" rating and a target price of RMB 265. As for Brilliance China, its stock price mainly depends on investors' expectations of future dividends and may be affected by the company's future investment projects. Based on the unclear dividend ratio and earnings per share of RMB 1.8, the bank maintains a "buy" rating.
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