Shenzhen Inovance Earnings: Overseas Business Prioritized as China Growth Slows

We lower our fair value estimate for narrow-moat Shenzhen Inovance to CNY 60 per share from CNY 64 to reflect management’s more conservative 2024 outlook and a worse-than-expected product mix due to a higher proportion of revenue from electric vehicles, which have lower profitability. We have trimmed our gross margin assumptions. We think Inovance is fairly valued as intensifying pricing pressures in the general automation and EV segments could be offset by a budding macroeconomic recovery in China.