Electric vehicle makers XPeng and Nio share prices on high expectations after recent rally: UBS By Investing.com

Investing.com — Shares of Chinese electric vehicle makers XPeng (NYSE: ) and Nio (NYSE: ) have expected high prices following a recent pullback, according to a UBS note on Wednesday.

The investment bank said China’s broader auto sector has grown by 30-50 percent in the past month as a series of monetary and fiscal easing measures.

As a result, Chinese automakers now account for 13% of global auto market capitalization, up from 9% just two months ago, though still modest compared to their 20% share of the global auto market and share of 60% of the electric vehicle market, he explains. UBS.

However, the bank’s analysts warn that XPeng and Nio, both rated Neutral, are trading at high valuations.

XPeng is priced at 1.5x 2025E price-to-sales (P/S), while Nio is at 1.1x. According to UBS, these valuations assume that both companies will gain significant market share and achieve high single-digit net margins in the coming years without the need for additional equity refinancing.

“While such a scenario is possible, we believe it will be difficult to achieve, especially given the fierce competition from larger and more cost-efficient companies such as BYD (SZ: ) and Li Auto (NASDAQ :)”, wrote UBS.

UBS remains bullish on other Chinese automakers such as CATL and GWM, which it believes offer more attractive valuations.

CATL, trading at 20.7x 2025E, is seen as well-positioned to benefit from Europe’s accelerating electrification, while GWM, at 7.9x 2025E PE, has upside potential from domestic premiumization and international expansion, says CAT. banking.

UBS advises investors to be selective in the Chinese auto sector, with CATL and GWM as preferred stocks. They remain on the sidelines when it comes to XPeng and Nio due to their high valuation expectations.