Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

Equity Bottom-Up

Eva Precision Industrial Holdings / Equity Bottom-Up

<ul>
<li>After rallying a fair bit at the beginning of 2023, we have seen sharp pullbacks in <a href="https://www.smartkarma.com/entities/eva-precision-industrial-holdings-ltd" target="_blank" data-smartkarma-citation="entities:17511:1" rel="noopener">Eva Precision Industrial Holdings (838 HK)</a> and <a href="https://www.smartkarma.com/entities/china-meidong-auto-holdings-limited" target="_blank" data-smartkarma-citation="entities:10795:1" rel="noopener">China MeiDong Auto (1268 HK)</a> share prices.</li>
<li>We believe the price cuts highlighted by <a href="https://www.smartkarma.com/profiles/victoria-li-37be10a4-61ab-4f2c-8657-201b7837050d" target="_blank" data-smartkarma-citation="accounts:780" rel="noopener">Victoria Li</a> in her insight <a href="https://www.smartkarma.com/insights/china-auto-ice-price-war-triggered-by-dongfeng-jv-players-under-pressure" target="_blank" data-smartkarma-citation="insights:97517" rel="noopener">China Auto: ICE Price War Triggered by Dongfeng, JV Players Under Pressure</a> are a significant cause. </li>
<li>While we like both stocks and they are cheap, we feel both companies will face short to medium-term pain in their businesses and share prices as the saga unfolds.</li>
</ul>


After rallying a fair bit at the beginning of 2023, we have seen sharp pullbacks in Eva Precision Industrial Holdings (838 HK) and China MeiDong Auto (1268 HK) share prices.
We believe the price cuts highlighted by Victoria Li in her insight China Auto: ICE Price War Triggered by Dongfeng, JV Players Under Pressure are a significant cause. 
While we like both stocks and they are cheap, we feel both companies will face short to medium-term pain in their businesses and share prices as the saga unfolds.


Thoughts On The Recent Pullbacks in Meidong and EVA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/eva-precision-industrial-holdings-ltd" target="_blank" data-smartkarma-citation="entities:17511:1" rel="noopener">Eva Precision Industrial Holdings (838 HK)</a> is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3% dividend yield (30% payout ratio).</li>
<li>H1 2022 was groundbreaking for the company as it commenced strategic cooperation with  <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> on products and bagged orders from Huwaei and Tesla, with more coming in H2.</li>
<li>There is additional room for buybacks as the stock price is &lt; 2HKD and the company only completed 3-4% of its 200 mn HKD buyback.</li>
</ul>



Eva Precision Industrial Holdings (838 HK) is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3% dividend yield (30% payout ratio).
H1 2022 was groundbreaking for the company as it commenced strategic cooperation with  BYD (1211 HK) on products and bagged orders from Huwaei and Tesla, with more coming in H2.
There is additional room for buybacks as the stock price is &lt; 2HKD and the company only completed 3-4% of its 200 mn HKD buyback.


EVA Precision: Poor Mans Tesla/ EV Play/ Onwards and Upwards from H1 2022

<ul>
<li>
<a href="https://www.smartkarma.com/entities/eva-precision-industrial-holdings-ltd" target="_blank" data-smartkarma-citation="entities:17511:1" rel="noopener">Eva Precision Industrial Holdings (838 HK)</a> is a supplier of office and automotive equipment (seat/battery frames and moulds), trading at 8.1x PE FY22 with an inflection point in earnings growth.</li>
<li>As a supplier to <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US),</a> <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, and Lucid, it is a play on the expansion of the EV space.</li>
<li>Legacy business of office equipment will also experience growth due to the exit of foreign businesses like Fuji and Samsung enabling the company to have 25% CAGR revenue growth.</li>
</ul>



Eva Precision Industrial Holdings (838 HK) is a supplier of office and automotive equipment (seat/battery frames and moulds), trading at 8.1x PE FY22 with an inflection point in earnings growth.
As a supplier to Tesla Motors (TSLA US), Great Wall Motor (2333 HK), and Lucid, it is a play on the expansion of the EV space.
Legacy business of office equipment will also experience growth due to the exit of foreign businesses like Fuji and Samsung enabling the company to have 25% CAGR revenue growth.


EVA Precision 838 HK: Play on EV Market Growth

<ul>
<li>
<a href="https://www.smartkarma.com/entities/eva-precision-industrial-holdings-ltd" target="_blank" data-smartkarma-citation="entities:17511:1" rel="noopener">Eva Precision Industrial Holdings (838 HK)</a> has come off its lows but still trades at an attractive  7.8x/5x PE FY22e/23e and a dividend yield of 3.8%/5.9% FY22e/23e (assuming 30% payout).</li>
<li>The auto business should be propelled forward by orders from EV stalwarts, BYD, Nio, Tesla, etc. We expect the auto business (30% of revenue) to grow 50% in 2023.</li>
<li>Another two catalysts we look forward to are the split of the auto business to unlock value and the completion of the buyback announced by the company in 2022.</li>
</ul>



Eva Precision Industrial Holdings (838 HK) has come off its lows but still trades at an attractive  7.8x/5x PE FY22e/23e and a dividend yield of 3.8%/5.9% FY22e/23e (assuming 30% payout).
The auto business should be propelled forward by orders from EV stalwarts, BYD, Nio, Tesla, etc. We expect the auto business (30% of revenue) to grow 50% in 2023.
Another two catalysts we look forward to are the split of the auto business to unlock value and the completion of the buyback announced by the company in 2022.


EVA Precision: Updates, Poised For a Rally

<ul>
<li>Post a 40% correction, <a href="https://www.smartkarma.com/entities/eva-precision-industrial-holdings-ltd" target="_blank" data-smartkarma-citation="entities:17511:1" rel="noopener">Eva Precision Industrial Holdings (838 HK)</a> is now at a PE of 9x/5.8x FY22/23e with a dividend yield of 3.0/5.1% FY22/23e (assuming a 30% payout ratio).</li>
<li>The company has resumed buybacks since the 13th of October, purchasing 1.43 mn shares (0.08% of outstanding shares) over four trading sessions. We see this trend continue for two weeks.</li>
<li>Catalysts here would come from solid earnings releases, strong order book-related announcements, and a potential to unlock value from the business. </li>
</ul>


Post a 40% correction, Eva Precision Industrial Holdings (838 HK) is now at a PE of 9x/5.8x FY22/23e with a dividend yield of 3.0/5.1% FY22/23e (assuming a 30% payout ratio).
The company has resumed buybacks since the 13th of October, purchasing 1.43 mn shares (0.08% of outstanding shares) over four trading sessions. We see this trend continue for two weeks.
Catalysts here would come from solid earnings releases, strong order book-related announcements, and a potential to unlock value from the business. 


EVA Precision: Catalysts Galore, Lots to Look Forward to in FY23

Hong Kong

EVA Precision Industrial Holdings Limited, through its subsidiaries, designs and fabricates metal stamping moulds, manufactures metal stamping components, and provides assembly services in the Peoples Republic of China.

Eva Precision Industrial Holdings (838 HK)

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Eva Precision Industrial Holdings (838 HK)

Thoughts On The Recent Pullbacks in Meidong and EVA

Price cuts in the China auto sector are forcing downgrades and share prices to retrace. We understand there will be short/medium-term pain but EVA...

Sameer Taneja

EVA Precision: Poor Mans Tesla/ EV Play/ Onwards and Upwards from H1 2022

Eva Precision Industrial Holdings (838 HK) is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3%...

Sameer Taneja

EVA Precision 838 HK: Play on EV Market Growth

Eva Precision Industrial Holdings (838 HK) is a supplier of office and automotive equipment (seat/battery frames and molds), trading at 8.1x PE...

Sameer Taneja

EVA Precision: Updates, Poised For a Rally

Eva Precision Industrial Holdings (838 HK) has come off its lows but still trades at an attractive 7.8x/5x PE FY22e/23e and a dividend yield of...

Sameer Taneja

EVA Precision: Catalysts Galore, Lots to Look Forward to in FY23

Post a 40% correction, Eva Precision Industrial Holdings (838 HK) is now at a PE of 9x/5.8x FY22/23e with a dividend yield of 3.0/5.1% FY22/23e...

Sameer Taneja

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)