G Sachs: BYD COMPANY & XPENG-W Sector Top Picks, Rating Initiated Buy
Goldman Sachs published a research report on the Chinese auto industry. Driven by leading technology and product capabilities, the broker expected overseas sales volume for China's Auto OEM from 2022 to 2030 to increase from 2.7 million units to 8.5 million units, with the figure this year forecasted to grow 61% YoY to 4.3 million units, higher than the market consensus by 7%.
Goldman estimated that investors will be concerned about further pricing pressure from car makers, after $Tesla(TSLA.US$ started the price cut rally in January this year. Based on an analysis of changes in prices and sales of new energy vehicles, the broker expected that under the base case scenario, the potential impact on $BYD COMPANY(01211.HK$ operating profit next year could range from a 19% drop to a 22% increase, while that for $XPENG-W(09868.HK$ could range from a 46% drop to a 39% increase.
Goldman believed that as NEVs adopt more technological product features, competition is likely to evolve from near-term themes of range, safety and cost to other medium-term themes, including intelligent cabins and advanced driver assistance systems, as well as long-term themes of branding and distribution.
Among the sector, Goldman's top picks are BYD and XPENG, which are both initiated at Buy rating. The broker believed BYD's overseas expansion and brand premiumization could bring a higher return on equity, and it is optimistic that XPENG's new models could support the company's revenue and gross profit growth.
The latest ratings and target prices of Goldman Sachs on auto stocks are listed below.
Stock｜Rating｜Target Price (HKD)
$BYD COMPANY(01211.HK$ ｜Buy｜$337
$XPENG-W(09868.HK$ ｜Buy｜$70
$GAC GROUP(02238.HK$ ｜Neutral｜$4.8
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