Nexteer (or the "Company") launched 23 new projects in the first quarter of 2025 (19 of which were newly acquired businesses), with new energy vehicle (NEV) projects accounting for 60.9% or 14 projects, representing 65.2% of all projects in the Asia-Pacific region. The primary highlight of the first quarter was the sustained strong booking flow from Chinese NEV OEMs, covering REPS, DPEPS, and the latest Rear Wheel Steering (RWS) systems. Additionally, the Company secured significant steering column bookings from North American clients, enhancing the competitiveness and scale of its North American steering column business. We expect the Company to secure more bookings related to "By-Wire" throughout the year. The Company's full-year booking target is US$5.0 bn, with first-quarter bookings totaling US$0.8 bn, accounting for 16.0% of the annual goal. In terms of new business, the Company continues to increase investment in R&D. In addition to the RWS business introduced last year, the new Electro-Mechanical Braking (EMB) product is also in development actively.
Recently, the Company's stock price has been affected by US tariffs, but the impacts remain manageable overall. The primary disruptions came from the supply of parts and raw materials from Canada and Mexico, with a 25% tariff on USMCA-non-compliant automobile parts and a 25% tariff on auto parts imports to the U.S. However, most products exported from Mexico to the U.S. comply with the USMCA, continuing to enjoy tariff-free status for USMCA-compliant automobile parts. The Company is actively collaborating with customers and suppliers to optimise regionalised supply chain and manufacturing strategies to mitigate market uncertainties, particularly the policy risks facing products imported to the U.S. Meanwhile, for tariff costs that cannot be exempted, the Company is ensuring compensation from customers to offset these expenses
Favourable policies: on 25 Apr., the Trump administration plans to relax regulations on autonomous driving and reduce the original cumbersome accident reporting process. Self-driving vehicles for non-commercial purposes can skip some compliance procedures when conducting testing, demonstration, research and other activities. This policy is conducive to the further development of autonomous driving in the United States. Nexteer will directly benefit from its autonomous driving-related business, high-capacity EPS, as well as advanced SBW and RWS BUs
Taking into account 1) the impact of the disruption of US auto tariffs; 2) continued strong booking wins, especially in APAC region; 3) the temporary ease of US tariffs; and 4) the relaxation of US autonomous driving regulation, we maintain a "Buy" investment rating, with a target price of HK$6.50 per share, corresponding to 15.6x 2025 PER.
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; and 3) US tariff risks may exceed expectations