On Wednesday, Citi upgraded Shenzhen Inovance Tech (300124:CH) stock from Neutral to Buy, raising the price target to RMB70.00, up from RMB55.00. The upgrade follows observed improvements in the company's general automation order growth, which reported a 10% year-over-year increase in October 2024. The firm anticipates this momentum to strengthen further in the following months, citing a low comparison base from the previous year and a diminishing impact from weaker new energy sectors.
Citi's analyst noted that these factors are expected to provide a solid foundation for Inovance's automation business to turn around starting in 2025. In light of these developments, Citi has also revised its 2025 earnings forecasts for Inovance upward by 7%. Adjustments were made to account for increased general automation revenue and stronger-than-expected revenue from New Energy Vehicle (NEV) E-axle products.
The revised price target represents approximately a 27% increase from the previous target, which the firm attributed to rolling over the earnings per share base to 2025 estimates while maintaining the same price-to-earnings multiple of around 30 times. This adjustment reflects Citi's confidence in the company's future financial performance.
The upgrade comes after Inovance's stock underperformed the CSI300 index by about 23% year-to-date. With the anticipated improvements in the automation business, Citi expects Inovance's stock performance to reverse and show positive results in 2025.
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