Nexteer:Upbeat 3Q call,solid growth ahead

Backlog at a high level: The OTL backlog remained high at $11.8bn as atthe end of 3Q, up from $10.8bn as at the 1H term-end. The company alsolaunched 7 new programs in the 3Q and is on track to achieve its target of 17new launches in the 2H. A growing backlog, coupled with the smooth launchof new programs, should continue to support growth. The company continuesto see major growth potential in emerging markets, as evidenced by the factthat 6 of the 7 new launches in the 3Q were outside the US market and camefrom China (3), India (1), Brazil (1) and Mexico (1).

First ADAS product for the US market in 2018: Management alsohighlighted on the call that their ADAS-related product – cyber securitysolutions – will first be launched in the US market in 2018, followed by theEuropean and China markets afterwards. While the company continues tostress that the initial financial contribution from these products will be low inthe near term, we believe it shows the company’s commitment to R&Dinvestment in technology to underpin long-term growth.

Upbeat on China auto markets: Despite the fact that no specific financialswere discussed, management concurred the 3Q performance had benefitedfrom a strong China auto market, and they expect the strength to continue intothe 4Q based on their orders on hand. Management also believes China’sauto market will remain the fastest-growing market globally in 2017. On theUS auto market, management commented that they had seen someweakness over the summer, but the pickup truck segment continues tooutperform the overall market.