"Large Banks" Research: Preference for auto suppliers over manufacturers, recommending CATL and FUYAO GLASS

HSBC's research report indicates that in September, electric vehicle sales in mainland China grew by 16% both month-on-month and year-on-year, and channels reflect positive order performance during the October Golden Week, partly driven by consumers making early purchases due to changes in year-end subsidy policies. The bank noted that the subsidy program will end at the end of the year, and the reduction in purchase tax will impact the mass market for vehicles priced below RMB 150,000, leading to higher volatility in this market compared to the luxury market.

Additionally, battery suppliers are facing supply tightness. In the first three quarters of this year, sales of battery electric vehicles (BEVs) outpaced plug-in hybrid electric vehicles (PHEVs), and the average battery capacity per vehicle has increased. The acceleration of electrification in domestic commercial vehicles, along with a surge in demand for energy storage systems (ESS) both domestically and internationally, has resulted in strong battery demand.

Given the weak automotive demand and intense competition, the bank prefers resilient suppliers over automakers; it is optimistic about CATL (03750.HK)(300750.SZ) due to its robust profitability and clear prospects for overseas expansion, with target prices of HKD 594 for H shares and RMB 450 for A shares. Furthermore, HSBC expects FUYAO GLASS (03606.HK)(600660.SH) to benefit from increased sales and average selling prices, driving profit margins and overseas growth, with target prices of HKD 91.2 for H shares and RMB 92.2 for A shares.

The bank is also optimistic about leading companies in autonomous driving, such as Horizon Robotics (09660.HK) and Top Group (601689.SH), with target prices of HKD 11 and RMB 82, respectively. Among automakers, the bank prefers Geely Auto (00175.HK) due to its continuously increasing market share in electric vehicles, upgrades in autonomous driving technology, and a strong product pipeline in the second half of the year; the target price is HKD 30. All of the aforementioned stocks are rated as "Buy."