Fangzheng Securities: Policy and new vehicle cycle resonance opens up the repair of the automotive sector.

Fangzheng Securities pointed out that the car market in January and February was influenced by the continuation of policies, and short-term demand was under pressure. After the Spring Festival, with the acceleration of replacement subsidies policies in various regions, leading company BYD took the lead in driving industry expectations to recover, and terminal demand is expected to accelerate recovery. Coupled with the continued strong performance of exports, industry cycle fluctuations tend to smooth out. Currently, the PE-TTM of the Shenwan passenger vehicle sector is below the 20th percentile in the past five years, making the valuation end very attractive. With the traditional peak season for commercial vehicles approaching, it is recommended to focus on structural opportunities brought about by better-than-expected sales during the peak season. Among them, core commercial internal combustion engine components have low valuations in the early stage, and with the resonance of external prosperity such as increased demand for ships and machinery and power shortages in North America, they have clear potential for marginal profit improvement and valuation repair.