Dahua Jixian: Raise Nexteer's (01316) target price to HK$11.4 to a “buy” rating

The Zhitong Finance App learned that Dahua Jixian released a research report saying that Nexteer (01316)'s mid-term revenue increased 3.9% year on year to US$2,329 million, a record high, and net profit increased 35.2% year on year to about US$85.8 million. The adjusted EBITDA margin increased by 1 percentage point to 11.3%, mainly driven by positive business in the EMEASA (Europe, Middle East and Africa, and Southeast Asia) region. Management expects the effective tax rate to be slightly below 25% this year, compared to the previous forecast of 33%. The valuation base was extended from 2026 to 2027, keeping the target price-earnings ratio unchanged at 20 times. The target price was raised from HK$8.3 to HK$11.4, with a rating of “buy”.

According to the bank, the tariff costs of about 8 million US dollars have been recovered last year, but the 24 million US dollar cost involved in the cancellation of the North American electric vehicle project has not yet been recorded. The backlog of orders reached 3.3 billion US dollars, an increase of 1.2 times over the previous year, and management reaffirmed the target of 6 billion US dollars for the whole year. The first wire-controlled switching project has already been put into operation, but management expects the technology to contribute only a limited amount to the Group's revenue by 2030. In response to the latest performance, Dahua Jixian lowered Nexteer's 2026-2028 revenue forecast by 0.9% to 1.1%, raised the EMEASA EBITDA profit margin forecast from 8% to 11.5%, and lowered the effective tax rate forecast from 33% to 24.5%.