Nexteer released its business overview for the third quarter of 2024. There are four major business highlights: 1) winning replacement business for major pickup truck projects in North America, 2) continuing to receive new orders from Chinese automakers, 3) winning the first EPS business from European and Chinese automakers to jointly develop projects for the Chinese market, and 4) strong orders for the third quarter, reaffirming the full year's guidance.

Orders for the third quarter of 2024 reached $2 billion, and full-year orders are expected to reach $6 billion. Looking at the order structure by product, EPS accounts for 56%; by energy type, the electric vehicle business accounts for 35%; regionally, North America accounts for 57%, and the Asia-Pacific region accounts for 34%.

A total of 18 new projects were put into operation in the third quarter of 2024. All 18 projects were newly acquired, including 12 from the electric vehicle business and 12 from the Asia Pacific region; the models put into operation in the third quarter include Citroen C3/ec3, Cadillac Escalade IQ, Chery R7, Avita 07, Buick GL8, Lynk & Co 07, Aeon RT, BMW M5, and Tata Curvv.

Construction of a plant in Changshu and a technical center in Mexico is underway. According to the company's disclosure, the Changshu plant will be completed in January 2025; the Mexican technical center will be completed in 2026. We believe that the Changshu plant will increase the company's ability to undertake business in the Asia-Pacific region, and the Mexican technology center is expected to bring about certain R&D cost savings. Furthermore, the company is carrying out restructuring actions to improve profit levels in North America and Europe, Central Africa, and South America.

Profit forecast and investment advice: Considering the strong revenue growth in EPS products and the Asia Pacific region in 2023, combined with the new order structure in 2023, we believe the company continues to enjoy good growth potential. We expect the company's 2024-2026 revenue to be USD 4.5/6 billion, net profit to mother of USD 0.101/0.237/0.315 billion, and EPS of USD 0.04/0.09/0.13, respectively. Referring to comparable companies, the company was given 13 to 16 x PE in 2024, corresponding to a reasonable value range of HK$4.07 to HK$5.01 (converted at the exchange rate of HK$1 = 0.13 US dollars), maintaining the “superior to the market” rating.

Risk warning: Global passenger car sales have fallen short of expectations, and raw material prices have risen sharply.