CITIC Securities urges to take advantage of industry pessimism to layout the mainland automotive industry in advance, with Geely as the top pick and a target price of 32 yuan

The research report from China Merchants Securities International indicates that the wholesale numbers of some car manufacturers in the mainland weakened month-on-month in November. The China Passenger Car Association estimates that the overall retail sales of passenger cars (excluding exports) in November remained flat month-on-month but decreased by 8.7% year-on-year due to a high base, reflecting the impact of subsidy reductions on the industry in the fourth quarter. The firm believes that market sentiment is currently pessimistic enough, and one should seek hope and make forward-looking arrangements amidst the pessimism.

Regarding the market's general concerns about the uncertainty of subsidies next year, the effects of sales overdraft, and the rising costs of batteries due to lithium carbonate price increases, the firm believes that the subsidy regulation in the fourth quarter is essentially a necessary means to control excessive overdrafts of next year's sales. It is expected that there will be a significant opportunity to restore subsidy support policies in the first half of next year. Additionally, considering the mining costs of lithium carbonate and the downstream economic conditions, the likelihood of continuous significant increases in lithium carbonate prices is low. The firm believes that now is the opportunity to gradually accumulate companies with high certainty of performance growth next year.

In terms of automotive stocks, the firm first recommends Geely Auto (00175.HK) due to its high performance certainty and undervaluation, with a target price of HKD 32; followed by BYD (01211.HK) and XPeng (09698.HK), with target prices of HKD 130 and HKD 115, respectively. For automotive parts stocks, the firm recommends Minth Group (00425.HK) and Fuyao Glass (03606.HK), with target prices of HKD 42 and HKD 86, respectively. All five stocks are rated "Buy."

Additionally, the firm believes that the AI industry's overall chain has dragged down the stock prices of robotics and intelligent driving chain companies, which have generally experienced a phase of decline. After the leading companies fulfill and implement concentrated orders, a fundamental support will be formed. In the medium to long term, the firm continues to be optimistic about the leading tracks of "AI + Automotive" and "AI + Robotics," currently focusing on potential major catalysts in the first quarter of next year, including the listing of Yushu Technology and Tesla's release of the third-generation robot; the firm suggests accumulating after the release of adjustment pressure.

The firm recommends UBTECH (09880.HK), Horizon Robotics-W (09660.HK), and Hesai (HSAI.US), with target prices of HKD 172, HKD 13.8, and USD 28, respectively. All three stocks are rated "Buy," and the firm also recommends DeepRoute-W (02590.HK)