Electric vehicles and more: UBS picks the green tech stocks set to outperform

Published Wed, Sep 1 202112:03 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at UBS have named their "best investment ideas" across U.S. and global green technology stocks, including electric vehicle (EV), battery and renewable energy companies. In its "Greentech goes global" research note dated Aug. 24, UBS analysts chose companies that they said "will play a key role in the global energy transition and will ride a new wave of private investments, spurred on by some of the biggest green stimulus programs the world has ever seen." "The world is becoming warmer as carbon dioxide emissions have accelerated since the mid-20th century. COVID-19 might only be a foretaste of the kind of economic shocks and supply-chain disruptions that could be triggered by a climate crisis," the analysts added. Electric vehicles General Motors is set to benefit from President Joe Biden's infrastructure plan , including investment in electric vehicles, the analysts said. GM is set to invest almost $27 billion in the technology over the next five years. Auto supplier Aptiv is a pick for being "in the forefront of the emerging business of high voltage components for electric vehicles," as well as for its customers across geographies including Europe, China and the Americas. UBS also likes German semiconductor supplier Infineon Technologies , which it said was likely to benefit from strong demand growth from EVs. "Infineon is a leading global supplier of onboard charger (OBC) semiconductors for electric and hybrid electric vehicles. While its dominance in this market is normally associated with Europe, it has captured 50% of the market in China," the analysts stated. Japanese auto parts firm Denso is on UBS's list as it is "well positioned to take advantage of the global shift towards electric vehicles and hybrid vehicles (HEV), which we expect to accelerate." Chinese firm Li Auto is a pick for its focus on premium EVs with an extended range, with the Li ONE SUV priced at 328,000 yuan renminbi ($50,760). "We expect China's EV market to grow 5x from 2020 to 2025, and believe Li Auto has the potential to capture a meaningful share, as it has successfully built initial brand recognition—it sold 25,000 units in July 2020 priced above CNY 300,000, a segment traditionally dominated by foreign brands," the analysts wrote. Batteries Battery cell producer Samsung SDI is the "leading" company in its sector globally, with customers including Apple and Samsung , the UBS analysts said. "With South Korea, Japan and China having announced ambitious carbon neutral targets, we remain positive on the long-term outlook for regional EV battery demand growth," they added. Japanese firm TDK is a pick for expanding its battery business beyond smartphones and into tablets, video games consoles, e-bikes and energy storage systems. Meanwhile Toray — also based in Japan — is a "key beneficiary of increased demand for climate and environmentally friendly products," UBS said. "It is a leading manufacturer of carbon fibers and supplier of battery separator film for lithium-ion batteries, whose sales are set to grow in the coming years," the analysts added. Renewable energy Sunrun , the largest installer of home and commercial solar systems in the U.S., is likely to see "incremental demand" for its products due to favorable policy, UBS said. Its share price "has corrected significantly" since the start of the year, providing a good entry point for investors, the analysts added. Chinese solar glass manufacturer Xinyi is also a pick. "A healthy inventory level and recent price cuts for solar glass to further stimulate demand should help the company," the analysts wrote. "We expect these companies to outperform global equities due to superior growth potential driven by green investments," the analysts wrote. A growing trend UBS isn't the only investment bank looking in-depth at the electric vehicle market. Earlier this month, analysts at Goldman Sachs confirmed their buy ratings on several Taiwanese semiconductor stocks that work with the automotive industry after holding meetings with companies in the sector. And despite the ongoing global chip shortage , Tom Narayan, equity analyst for European autos at RBC Capital Markets, told CNBC he's backing both Tesla and Volkswagen as the EV companies best placed to ride out the risks.

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Analysts at UBS have named their "best investment ideas" across U.S. and global green technology stocks, including electric vehicle (EV), battery and renewable energy companies.