Citi cuts NEXTEER's earnings forecast for the next two years by 20% to 31%, target price lowered to HKD 7.2

Citi published a research report indicating that it held an update meeting with the management of NEXTEER (01316.HK) today (26th). The management expects to achieve a new revenue high this year, with a growth rate exceeding the market by 200 to 300 basis points, primarily driven by the Asia-Pacific region; profit margins are expected to further improve, with the Asia-Pacific profit margin likely to remain between 16% and 17%. The management anticipates that the Electronic Mechanical Brake (EMB) will commence production by the end of this year and secure contracts within the year, while the Steer-by-Wire (SBw) business is expected to start contributing significant revenue in 2026, with strong free cash flow.

However, considering a more conservative outlook on the passenger car market, Citi has lowered the group's revenue forecasts for this year and next by 8% to 9%, to USD 4.9 billion and USD 5.25 billion, respectively. The gross margin forecast has been reduced by 0.8 to 1.1 percentage points, to 11.2% and 11.5%; and the net profit forecast has been cut by 20% to 31%, to USD 110 million and USD 142 million. Based on the adjustments to the earnings forecast, the bank has lowered the target price from HKD 8 to HKD 7.2, maintaining a "Buy" rating