Shenzhen Inovance Earnings: Electric Vehicles and Global Expansion Prolong Impressive Prospects

We maintain our fair value estimate for narrow-moat Shenzhen Inovance at CNY 64 per share despite moderating our gross margin assumptions in electric vehicles on higher pricing pressure and the elevator businesses as the company may need to entice customers in Europe with lower prices initially. Our base case on long-term EV sales growth near 30% CAGR fueled by both content growth and vehicle shipments is unchanged. The stock is trading at 33 times 2023 P/E. Inovance is fairly valued in our view, but there are chances of overshoot if EV demand recovers before 2024, or the company manages to grow overseas sales faster than we project.