Jinwu Financial News | CMB International has pointed out that Eva Holdings (00838) is steadily transitioning its auto parts business to a first-tier supplier, and with more orders from OEM manufacturers, it will drive revenue growth in the 2025 fiscal year.
The bank pointed out that in the first half of the year, the gross margin of Eva Holdings' office automation business increased by about 1 percentage point year-on-year, and departmental revenue increased by 2.5% year-on-year. The bank expects that after the inventory destocking in the first quarter of 2024, which led to a 2% year-on-year decline in revenue at its Vietnam factory in the first half of 2024, the gross margin of office automation will continue to expand on a quarter-on-quarter basis in the second half of 2024.
The bank further pointed out that Eva Holdings' Chongqing factory is scheduled to start supplying to Changan (000625 CH) from mid-September. According to management, the total backlog of orders from Changan has increased to 1 billion Hong Kong dollars, and it is expected to contribute approximately 0.13 billion to 0.14 billion Hong Kong dollars in revenue in the 2025 fiscal year. Its Wuhan factory has also received new orders from Stellantis (STLA), and Eva Holdings' Mexican factory is expected to receive more orders from Stellantis. Therefore, the bank predicts that revenue from auto parts will grow by 15% to 2.34 billion Hong Kong dollars in the 2025 fiscal year.
The bank stated that it has lowered its net income forecast for the 2024/2025 fiscal year by 9%/4% to 0.26 billion/0.301 billion Hong Kong dollars. The bank expects operating profit to increase by 15% and revenue to increase by 8% year-on-year in the 2025 fiscal year, with improved control of sales and management expenses. Interest expenses are expected to decrease in the 2025 fiscal year, but may be offset by a higher tax rate. The stock is currently trading at 4.3 times the bank's 2024 fiscal year's PE ratio. The bank expects the company to maintain a 30% dividend payout ratio, and the dividend yield is expected to reach 7%. They maintain a "buy" rating but have slightly reduced the target price from 1.50 Hong Kong dollars to 1.40 Hong Kong dollars.