Goldman loves these EV sector stocks — and says one could rally 100%

Published Sun, Dec 12 20216:29 PM ESTUpdated Sun, Dec 12 20217:53 PM EST

It would come as no surprise if Tesla is the first name that springs to mind when it comes to electric vehicle stocks. But a screen of Goldman Sachs' conviction list — the bank's selection of stocks it believes will outperform — reveals four lesser-known names with exposure to the EV sector. EV makers have seen their share prices soar in recent years. Shares of Tesla — the world's most famous EV manufacturer and newly minted member of the $1 trillion market cap club — are up close to 60% over the past 12 months. CNBC looked at Goldman's conviction list to identify other stocks with exposure to the booming sector and which may have further room to rally. EV manufacturers Li Auto is one such company. The Chinese EV manufacturer is differentiating itself from the broader Chinese auto-making industry by envisioning and creating compelling EV consumer experiences, Goldman's analysts, led by Fei Fang, said on Aug. 12. He added the company is showing a willingness to take on the risk of unconventional technologies and act innovatively. Fang said the success of the company's Li One sports utility vehicle exhibited the company's understanding of consumer needs, operational capability and brand establishment. The company is leveraging these to its next-generation models with evolving autonomous driving technologies, Fang said. The company's second hybrid vehicle — the "X01" – is set to be unveiled in the second quarter of 2022, with the launch expected to "significantly enhance Li Auto's volume and gross margin," Fang said in a Dec. 1 note. Nasdaq-listed shares of the company are up nearly 8% this year. Goldman has a price target of $64 on the stock, which closed at $31 on Dec. 9 — an implied upside of 106%. Shenzhen-based automaker BYD is also on Goldman's conviction list. The company is transitioning from a mass electric vehicle manufacturer with significant fleet sales to an auto-tech innovator with back-to-back breakthroughs in product design and supply chain technologies, Fang said on Oct. 28. The bank noted that the company's electric cars have the "leading range performances and the lowest material costs in the industry." The company sold 203,000 vehicles in the third quarter of 2021, a 48% increase from 137,000 units in the second quarter, Fang added. Goldman expects the company's recent car launches to add more than 24,000 units in incremental sales every month. Shares of BYD are up more than 50% this year but Goldman thinks there is still room for further upside. The bank has a price target of 336 renminbi ($52.80) on the stock, which closed at around 300 renminbi on Dec. 9 — an implied upside of 22%. Supply chain picks Hong Kong-listed Ganfeng Lithium is another EV stock that has done well this year. Shares of the company — China's largest lithium producer — are up 50% year-to-date. "With its accelerated growth in chemical compounds output, Ganfeng looks well positioned to capture the strong growth ahead from the global EV market, with a sustained global lithium market share of 20-23% over 2021-2025 in our estimates," analyst Trina Chen said on Aug. 31. The company announced a deal in November to supply Tesla with lithium products for three years. Goldman has a price target of 230 Hong Kong dollars ($29.50) on the stock, representing an upside of 66% to the stock's closing price of 139 Hong Kong dollars on Dec. 9 Rounding off the list is Beijing-based automotive retailer Zhongsheng . In addition to partnering with incumbent carmakers on their new energy vehicle launches, the company has entered into cooperation agreements with XPeng , a Chinese smart EV manufacturer, and WM Motors in Apr. 2021 to establish sales centers on their behalf in top-tier cities, and to scale up aftersales services for new energy fleet across the country, Fang said on Aug. 9. The company also plans to build new energy vehicle "experience centers" in strategic locations to complement manufacturers' proprietary showrooms. Two showrooms for Xpeng are expected to commence by the end of 2021, Fang said on Apr. 20. Goldman has a price target of 110 Hong Kong dollars on the stock, which closed at 64 Hong Kong dollars on Dec. 9 — an implied upside of 72%.

The logo marks the showroom and service center for the US automotive and energy company Tesla in Amsterdam on October 23, 2019.

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