On Wednesday, Zhejiang Sanhua Intelligent Controls (002050:CH) shares received a positive outlook from Jefferies, with the firm initiating coverage on the stock with a Buy rating and setting a price target of RMB31.00. The coverage initiation by Jefferies comes on the back of Zhejiang Sanhua's significant role in thermal management, particularly in valve and pump products, and its strategic pivot towards the electric vehicle (EV) sector.
Zhejiang Sanhua, established in 1984, has been capitalizing on the increasing demand for EVs worldwide, transitioning from a refrigeration component supplier to a prominent auto component supplier. Its robust customer base includes industry giants such as Tesla (NASDAQ:TSLA), BYD (SZ:002594), and Li Auto (NASDAQ:LI). The company is also expanding its expertise in Thermal Management Systems (TMS) to the Energy Storage Systems (ESS) and humanoid robot industries.
Jefferies anticipates that Zhejiang Sanhua's auto component revenue will surge in 2025, driven by the anticipated launch of Tesla’s new low-cost model in the second half of 2025 and the increased production capacity of the Cybertruck. The HVAC segment is also expected to continue its steady growth trajectory.
The firm projects a Compound Annual Growth Rate (CAGR) of 15% for Zhejiang Sanhua's top-line and 17% for its bottom-line from 2024 to 2026. The price target of RMB31.00 is based on a 31x 2025 estimated Price to Earnings (PE) ratio, which aligns with the company's five-year average. Jefferies' coverage initiation reflects confidence in Zhejiang Sanhua's growth potential and strategic market positioning.
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