Goldman Sachs has named a raft of stocks it thinks will benefit from a rapidly growing electric vehicle market in China. All are buy-rated by the bank. China —the world's largest EV market — is expected to contribute the lion's share of global EV sales this year, Goldman's analysts, led by Kota Yuzawa, said on Monday. The bank expects electric vehicle sales in China to increase by 58% this year, with the segment hitting a penetration rate of 39% by 2025. "This echoes our positive view on automotive semis and automotive software, which are driven by growing technology content per car," Goldman analyst Allen Chang said in a separate note on Monday. Among the stocks Goldman says will benefit is semiconductor company Hangzhou Silan Microelectronics . The banks says it has a "good chance" of winning orders from local customers looking to secure IGBT power modules — a package of chips that make up the "heart" of the electrified drive train in EVs— or to diversify their supply chain. This is an "important breakthrough" due to the higher barriers of entry for IGBT in EVs, Chang said, which would translate into higher revenue and profit contribution over the longer-term. The bank has a price target of 80 Chinese yuan ($12.60) on the stock, which closed at around 50 Chinese yuan on Jan. 12, representing a potential upside of 62%. Goldman also likes electronics manufacturer Wingtech for its market share gains in China and the shift in its product mix to higher-voltage devices. The company's clientele in the automotive sector includes the likes of Continental , BYD , Denso , Delphi and Panasonic , the bank added. It has a price target of 175 Chinese yuan on the stock, which closed around 120 Chinese yuan on Jan. 12 — an implied upside of 46%. Meanwhile, rising vehicle digitalization has also put automotive software stocks into focus, as demand for smart features rise in tandem, Chang said. Within this space, Goldman likes operating systems provider Thundersoft. The company counts more than 200 car original equipment manufacturers among its customers, for which it charges long-term royalty fees, the bank said. It added that the company is aiming to nearly triple the dollar content per car in the next 3 years. Goldman has forecast the company's automotive revenues to grow at more than 60% annually into 2023, and at a rate of 35% from 2023 to 2026, to eventually contribute more than half of the company's revenues. The bank has ascribed a price target of 235 Chinese yuan on the stock, representing a potential upside of 70% to its closing price of around 138 Chinese yuan on Jan. 12. Automotive electronics manufacturer Huizhou Desay also makes the Goldman list, with the bank expecting the smart driving segment to deliver revenue growth of more than 100% into 2023, and 54% thereafter into 2026. The bank has ascribed a price target of 184.20 Chinese yuan on the stock, which closed at around 142 Chinese yuan on Jan. 12 — an implied upside of 30%. Rounding off the Goldman list are automotive chip makers Starpower and CR Micro, along with photo and video imaging software developer Arcsoft.
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Goldman Sachs has named a raft of stocks it thinks will benefit from a rapidly growing electric vehicle market in China. All are buy-rated by the bank.