Our target price for AIMA of Rmb42.0 is based on a 2025-27E PEG of 1.2x, set at 1 standard deviation above the 1-year sector average given earnings are expected to continue to grow strongly in the coming 3 years. Applying 1.2x to a 2025-27E EPS CAGR of 13% derives a target multiple of 15.7x 2025E P/E, and this in turn is applied to 2025E EPS of Rmb2.67.

Our quants model assigns a High Risk rating to AIMA based on its share price volatility in the past 12 months. However, we believe such a rating is not warranted given the company's long track record (20 years in China) and our expectations for strong and better-quality earnings growth in the medium term.

Downside risks that could mean the shares fail to achieve our target price include: 1) worse-than-expected sales volumes due to lackluster sector dynamics; 2) failure to achieve targeted sales; 3) looser-than-expected enforcement of new national regulations leading to fewer-than-expected replacement purchases; 4) product defects resulting in brand image deterioration; and 5) continued rise in raw material costs leading to continued margin deterioration.