Han’s Laser and Inovance See the Start of a Rebound, but Margin Pressures and Outlook Limit Upside

We maintain our CNY 20 fair value estimate for no-moat Han’s Laser and CNY 64 fair value estimate for narrow-moat Shenzhen Inovance, ahead of both firms reporting 2023 results in April. We believe both companies are fairly valued. While Han’s Laser and Inovance benefit from their customers ramping up exports of electric vehicles, lithium batteries, and photovoltaic products, we believe margin pressures in EVs and battery equipment, and an unimpressive outlook in other sectors limit upside to the stocks.