CLSA has released a research report indicating that mainland China's auto sales data for January experienced an unprecedented decline, with the industry average dropping approximately 30% month-over-month as consumers adopted a wait-and-see stance due to reduced subsidies and discounts. Considering the timing of the Lunar New Year this year, the firm expects sales in February to remain subdued. However, it is believed that a series of new models from automakers following the holiday period will help re-attract consumers, with BYD COMPANY (01211) specifically targeting new features that customers are willing to pay for. The top picks are BYD COMPANY and GEELY AUTO (00175), based on their projected 2026 export scale and higher per-vehicle profitability, with target prices set at HK$130 and HK$23 respectively, both receiving a "High Conviction Outperform" rating. The firm anticipates overall industry performance in the first quarter of this year will be weak, suggesting that April may present a more opportune time to reassess the sector. CLSA expressed confidence in BYD's recovery of growth momentum as the domestic market continues to adapt to recent changes. Simultaneously, it maintains the view that exports will be the primary growth driver for the year, aiding in the improvement of average selling prices and profit margins. Companies with robust vehicle launch plans overseas, particularly in regions like Europe, are expected to demonstrate stronger earnings resilience.
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