Shenzhen Inovance Plagued by Rising Costs and Property Slowdown; EV Expectations Still Lofty

We leave our fair value estimate on Shenzhen Inovance at CNY 48.50 per share, and 2022-25 forecasts little changed. With electric vehicles already comprising 20% of China’s new vehicle sales, Inovance appears overvalued with lofty expectations of 60% CAGR over the next five years compared to our forecasts of 30% by 2025. Given Inovance’s current valuation of 46 times 2022 P/E, we prefer Delta Electronics and Han’s Laser, both are trading closer to our fair value estimates and have comparable exposure to electric vehicle, or EV, growth. Potential downward catalysts of the stock are interrupted elevator-related sales should property developers slow operations, and an eventual end of pandemic allows overseas peers to regain market share.