Shenzhen Inovance Technology (.SZ)_ NEV Electric Controller and E-axle System Market Shares Both Improved in 2024

Summary of Shenzhen Inovance Technology Conference Call Company Overview - Company: Shenzhen Inovance Technology (300124.SZ) - Industry: New Energy Vehicles (NEV) Electric Controllers and E-axle Systems Key Points Market Performance - Inovance's electric controller shipments grew by 59% YoY in 2024, with market share increasing by 0.5 percentage points to 10.7% from 10.2% in 2023, ranking No. 2 in the market [1] - E-axle system shipments increased by 79% YoY in 2024, with market share improving by 1.3 percentage points to 6.3% from 5.0% in 2023, ranking No. 4 in the market [1] - Both product categories outperformed the industry growth rates of 50% for electric controllers and 42% for E-axle systems in 2024 [1] Financial Metrics - The net profit margin (NPM) for Inovance's NEV powertrain business improved to 2.8% in 2023 and 6.3% in the first half of 2024 [1] - The upcoming IPO of the NEV powertrain business is expected to drive aggressive growth in this segment [1] Competitive Landscape - Inovance's position in the NEV electric controller market is highlighted by the following data: - 2023: 848,129 units shipped, 10.2% market share - 2024: 1,332,458 units shipped, 10.7% market share [5] - In the E-axle system market: - 2023: 274,353 units shipped, 5.0% market share - 2024: 489,783 units shipped, 6.3% market share [7] Valuation and Investment Outlook - Target price for Inovance is set at Rmb 70.0, based on approximately 30x FY25E EPS of Rmb 2.32, reflecting ongoing gross profit margin (GPM) pressure due to product mix changes [11] - Expected total return of 2.1%, with a dividend yield of 0.7% [2] Risks - Key risks to achieving the target price include: - Slower recovery in China’s automation demand - Weaker-than-expected growth in elevator demand - Weaker-than-expected GPM [12] Additional Insights - The strong performance of Inovance is attributed to significant installations with key customers, particularly Li Auto [1] - Continuous scale-up in production is anticipated to further enhance profitability in the NEV powertrain business [1]