Citi lowers Sanhua's target price to 35 yuan and downgrades its rating to "Neutral"

Citi stated that, based on the market's growing optimism towards humanoid robots and artificial intelligence data centers, Sanhua (02050.HK) has seen its stock price rebound from the low at the end of November last year. However, the contribution of humanoid robots and AI data centers to the company's revenue remains relatively small in the short term, and the cooling business may face growth pressure due to demand being squeezed by last year's trade-in subsidies. The automotive parts business may also be affected by declining Tesla sales and a slowdown in the growth of new energy vehicle sales in the mainland.

The bank believes that Sanhua's current risk-reward profile is neutral; after changing the valuation model, the target price for Sanhua H shares has been lowered from HKD 43 to HKD 35, while the target price for Sanhua A shares (002050.SZ) has been raised from RMB 40 to RMB 52, with the rating downgraded from "Buy" to "Neutral."

In the automotive parts industry, the bank prefers Sensata Technologies (00425.HK) and Joyson Electronics (00699.HK) due to their more attractive valuations and strategic involvement in the humanoid robot sector, while also benefiting from significant overseas business exposure