Gotion: Initiating Coverage on China’s Fourth-Largest EV Battery Maker; Shares Are Overvalued

We initiate coverage on Gotion High-tech, with a no-moat rating and a fair value estimate of CNY 17.10 per share. As the fourth-largest lithium-ion battery producer in China, we believe Gotion will benefit from the vehicle electrification trend. However, we think the company will face increasing pricing pressure to acquire new automobile customers, which will lead to low profitability in the next few years. Our fair value implies a 2024 price/earnings ratio of 70 times, and the Nov. 14 share price implies 97 times, so the shares are overvalued in our view.