According to Zhitong Finance APP, CICC released a research report maintaining its net profit forecasts for NEXTEER (01316) for 2025/2026. The current stock price corresponds to 12.6x/9.9x 25E/26E P/E ratios. The firm maintains its Outperform rating, citing high momentum in the automotive intelligence sector and the company's profit margin recovery cycle. CICC raised its target price by 17% to HK$8.4, representing 15x/12x 25E/26E P/E multiples with 21% upside potential from current levels.

The company announced its 1H25 results showing revenue of $2.242 billion, up 6.8% year-over-year, and net profit attributable to shareholders of $63.48 million, representing a three-fold increase year-over-year. Net margin reached 2.8%, the highest level since 2023.

CICC's main views are as follows:

**Revenue Growth Outpaces Regional Light Vehicle Sales Growth with Multiple Popular Vehicle Model Projects Launching**

By region, 1H25 revenue for North America/Asia Pacific/EMEASA reached $1.14/$0.69/$0.40 billion respectively, representing year-over-year growth of +1.7%/+15.5%/+9.4%. China and EMEASA regions maintained relatively high growth rates, with projects including Xiaomi YU7, North American EV leader SUV models, XPeng G9, and BYD Sealion 06 entering production.

By business segment, 1H25 EPS/CIS/HPS/DL business revenues were $1.53/$0.23/$0.09/$0.40 billion respectively, up +8.6%/+2.9%/+1.7%/+3.8% year-over-year.

**Gross Margin Improves Both Year-over-Year and Quarter-over-Quarter, Expense Ratios Decline Steadily**

1H25 gross margin was 11.5%, up 1.5ppt year-over-year and 0.6ppt quarter-over-quarter. According to the company's interim report, this was primarily driven by revenue growth and operational efficiency improvements.

By region, 1H25 EBITDA margins for North America/Asia Pacific/EMEASA were 7.6%/16.9%/8.8% respectively, changing -0.2/-0.8/+6.7ppt year-over-year and -0.9/flat/+0.6ppt quarter-over-quarter. The decline in North America was mainly due to tariff and supply chain impacts, while EMEASA's year-over-year comparison benefited from a low base affected by Brazilian floods in the prior period.

1H25 R&D/sales/administrative expenses were $75.39/$10.70/$81.47 million respectively, changing -14.9%/-0.8%/+13.8% year-over-year. The overall expense ratio trend showed steady decline, with R&D expenses decreasing mainly due to lower impairment charges on intangible product development assets related to cancelled customer projects. 1H25 effective tax rate was 28%, down 15.6ppt year-over-year and 4ppt quarter-over-quarter.

**Aggressive 2H25 Order Win Targets with Multiple Measures to Ensure Profitability**

1H25 new order wins totaled $1.5 billion, including domestic and overseas business from Chinese automakers, dual-pinion EPS and rear-wheel steering orders from European automakers. The company maintains its full-year order target of $5 billion unchanged.

For steer-by-wire technology, the company has secured awards for L4 autonomous driving vehicles from a global EV leader and steer-by-wire project designations from leading Chinese new energy OEMs. The firm believes Chinese automakers' steer-by-wire vehicle production timeline may lead globally, with the company expected to secure additional new designations.

The company recently launched its new Motion IQ software suite, helping customers improve efficiency and reduce costs. On profitability, the company is working with suppliers and customers to address tariff changes and negotiate incremental cost pass-through with customers. Additionally, capacity optimization and software service sales contribute to profitability improvements.

**Risk Factors:** Cost reduction and expense control effects falling short of expectations; slower-than-expected commercialization and mass production pace of steer-by-wire technology.