NEXTEER AUTOMOTIVE(1316.HK)：STRONGER 2H25 RESULTS; UPGRADE TO BUY ON SBW POLICY TAILWINDS AND KEY SBW PROJECTS KICK-OFF IN 1H26

Core Viewpoint - Nexteer is expected to achieve solid performance in 2H25, with revenue projected at approximately US$2.3 billion, reflecting a 7% year-over-year increase, driven by strong demand in the US and Europe, favorable foreign exchange conditions, and stable contributions from the Chinese market [1][2] Financial Performance - 2H25 net profit is anticipated to exceed US$70 million, marking a significant sequential increase from 1H25 and demonstrating ongoing profit recovery since 2024 [2] - The full-year 2025 revenue is expected to grow by around 7% year-over-year, supported by robust US pickup sales and favorable FX environment [2][9] - Net profit forecasts for 2025 and 2026 have been raised by 7-10% to US$137 million and US$160 million, respectively, due to stronger profit recovery [1][9] Regulatory Developments - China's new national standard for steering systems, effective July 2026, incorporates Steer-by-Wire (SbW) technology and removes the mandatory mechanical link requirement, facilitating the mass production and adoption of SbW systems [3][10] - This regulatory change is expected to accelerate the transition to higher-level autonomous driving functions and enhance the value content per vehicle [3][10] Technology and Market Position - The shift to SbW technology is projected to increase the average value per vehicle for suppliers, with mass production value for SbW systems estimated to exceed US$400-500 per vehicle, significantly higher than traditional steering systems [4][10] - Nexteer is set to commence mass production of two exclusive high-value SbW programs in 2026, including the Tesla Cybercab and Li Auto's refreshed L9, positioning the company favorably in the market [5][10] New Business Lines - Progress in Rear-Wheel Steering (RWS) is ahead of schedule, with production expected to start in 2026, while Brake-by-Wire commercialization is slightly delayed, with initial production now anticipated in 2027 [6] Shareholding Changes - Beijing E-town Capital has reduced its stake in Nexteer by 41.48 million shares since May 2025, but remains the second-largest shareholder, with the reduction viewed as a routine financial decision rather than a reflection of the company's fundamentals [7][8] Valuation and Market Outlook - The target price for Nexteer has been raised to HK$9.00, based on an 18x 2026E P/E, reflecting improved earnings visibility and the anticipated contributions from the commercialization of SbW technology [1][10] - The share price is currently trading at 14.3x 2026E P/E, which is lower than its historical average and that of local peers in the autonomous driving supply chain [9]