Inovance Becomes Attractive as Automation and EV Prospects Outshine Valuation. FVE up to CNY 60.

We lift our fair value estimate on narrow-moat Shenzhen Inovance to CNY 60 per share after incorporating more upbeat revenue forecasts but more conservative gross margin assumptions, especially for 2022. Despite a sell-off in China tech names due to concerns on the economic toll from lockdowns, we view Inovance’s valuation and fundamentals have improved to justify a buy. The stock is trading at 36 times 2022 adjusted P/E and 27 times 2023 adjusted P/E. We regard Inovance as a high-quality ticker which would be among the first to rebound when sentiment bottoms out.