Nexteer's (or the "Company") sales fundamentals are expected to change and get back to growth momentum in the US market under Trump's new administration, which hints that the recovery in the North American market is predicted to bounce back. We see this as a new catalyst to boost the Company's earnings in the next few years. Meanwhile, the Company is proactively going through business deployment from FV business to EV business. The development pace of the Company's EV business will not detour and will maintain strong growth.

Operations with other OEMs in APAC markets are progressing well, and Nexteer expects that in 2025 it will further expand its business with Chinese new energy OEMs, either existing business or the latest SbW system business. The Company is still crowned the top industry-leading halo in the SbW business and continues to lead the SbW market. The Company prioritizes resource allocation to SbW business opportunities and seeks to secure more deals with OEMs globally in the near term. Since Elon Musk gave Trump a strong endorsement during the latest US presidential campaign, we believe that the new Trump administration will give a green light in the field of advanced autonomous driving, which is expected to accelerate the arrival of advanced autonomous driving in EVs. Paired with the steady progress of advanced autonomous driving, 2025 will be a big year for advanced autonomous driving in the automotive industry. The Company believes that SbW is likely to be adopted first by leading OEMs globally. The Company's SbW system with industry-leading technology is expected to bring synergies to the Company in the next few years.

Also, at a time when the global auto industry is experiencing rapid EV development, the Company has shown good industry resilience with the coexistence of FV business and EV business. Nexteer managed to record strong bookings in 1H2024. The Company's new bookings in 1H2024 reached US$2.1 bn. Overall bookings among Chinese OEM customers almost tripled vs. 1H2023, putting the Company on track to meet the annual target of US$6.0 bn in all markets. The basic base of new bookings in the US market remained relatively stable, accounting for about 49% of total bookings in 1H2024. The Company continues to reap the fruits of cooperation with Chinese new energy OEMs in the EV business. Most of China's new energy OEMs are customers of the Company, including the majority of Chinese leading OEMs. We believe that the expansion of the EV business will further accelerate.

Given the positive changes of sales fundamentals and the fact that the EV business is booming, we consider raising our revenue forecast and target price in the next Company Report. The Company currently has a "Buy" investment rating with a target price of HK$4.00 per share, corresponding to 11.7x 2024 PER.

Risks: 1) APAC region growth may be slower than expected; 2) Recovery in the North American market may be slower than expected; and 3) the application of L3 and above advanced autonomous driving may be lower than expected.