Maintain "Buy" and raise TP to HK$6.50. Considering that 1) the US tariffs are expected to stimulate US business beyond expectations; 2) the expansion of the Mexican technical centre is expected to further radiate South American business; 3) favorable exchange rate impact; 4) benefiting from increased production, reduced fixed expenses and layout optimization measures, and 5) the booming NEV business in China, we raise Nexteer's (the "Company") 2025-2027F EPS forecast to US$0.053 (+0.003)/ US$0.077 (+0.004)/ US$0.115 (newly added). We raise the Company's TP to HK$6.50, corresponding to 15.6x 2025 PER, and we maintain "Buy" investment rating.
　　2024 results were in-line overall, with a continuous recovery in GPM. The Company recorded total revenue of US$4.21 bn in 2024, up 1.6% yoy, mainly because the Company's APAC regional revenue increased by 10.1% yoy, continuously beat market expectations, with revenue in the Chinese market grew rapidly, with a yoy increase of 13.3%. In contrary, there was a slowdown in the recovery of the Company's North American business, the revenue in the region decreased by 2.9% yoy. The South American business was affected by flood disasters, which also had an impact on Nexteer's business. The revenue of EMEAS gained by 1.7% yoy, which was worse than market expectations. The Company’s GPM increased by 1.7 ppts yoy to 10.5%, thanks to material, manufacturing and fixed cost reductions. The Company recorded a significant 68.0% yoy increase in net profit to shareholders, mainly due to 1) the US Early Retirement Incentive Program; 2) 10% salary reduction implemented in 2024 excluding APAC market; and 3) energy efficiencies. We remain high conviction that the Company will continue to achieve high growth in the APAC region in the next few years.
　　Nexteer recorded strong bookings in 2024 as the business in the Chinese market continued to maintain high growth. The Company's new bookings in 2024 reached US$6.0 bn, with 2025 annual target of around US$6.0 bn. The Company continues to embrace huge success in cooperation with Chinese NEV OEMs. Most of China's NEV OEMs are customers of the Company, including Li Auto, XPeng, BYD, Geely Auto, Changan Auto, Great Wall Motor, etc. The Company maintains its leading position in the steering system supply chain in the Chinese market, especially with new Changshu, China plant enabling continued further business growth in the Chinese market in 2025.
　　The SbW system has won two new bookings again in 2024, and the new RWS business is being developed. Nexteer expects that in 2025, Chinese NEV OEMs will be the first to adopt the SbW system. Nexteer continues to develop cooperation and testing projects on its SbW system with multiple global OEMs. The Company still maintains its industry-leading position in the SbW business and continues to lead the SbW market. The Company prioritizes resource allocation to SbW and RWS business opportunities. With the steady progress of advanced autonomous driving and the rapid development of intelligentization, 2025 will be a big year for advanced autonomous driving in the automotive industry. The Company believes that SbW and RWS are very likely to be adopted first by Chinese OEMs. The Company's industry-leading SbW system and RWS are expected to gradually mature in the next few years and bring greater revenue to the Company after 2030.
　　Risks: 1) APAC region growth may be slower than expected; 2) the application of L3 and above advanced autonomous driving may be lower than expected.