For the first time, we cover 100 million and Holdings give a buy rating, with a target price of HK $3.00. The business of Yihe Holdings mainly includes office automation equipment (manufacturing and assembly of moulds and parts) and auto parts (mainly stamping parts, including seat frame, body and chassis components, etc.). Relying on the mold experience accumulated in the office automation equipment business, the company established the Automotive Division in 2008, increased investment in plant and equipment after the acquisition of Chongqing Digital Model in 2333, began to focus on the stamping parts of the seat frame after trying different moulds and parts, entered the supply chain of the international major seat suppliers, and later became Tesla, Inc. (TSLA US, unrated) and Great Wall Motor (2011 HK). Buy / 601633 CH, buy) first-tier supplier. We believe that Yihe's auto parts business has reached an inflection point especially the business increment of Tesla, Inc. and Great Wall Motor will significantly increase the company's revenue and profit margins in the next few years. We expect revenue from the auto parts business of Yihe Holdings to grow by 50%, 50%, 40%, and net profit of auto parts, 168%, 80%, 46%, respectively, in the 22-24 fiscal year.
Benefit from the rapid growth of Tesla, Inc. 's sales. As Tesla, Inc. assembled the front seats in North America to save costs, the company replaced a North American company and began supplying the front seat frames of all models of Tesla, Inc. 's North American factories in July 2021. We estimate that this part of its income from Tesla, Inc. is expected to grow from HK $25 million last year to HK $150 million this year. Because the seat business competition in North America is much lower than that in China and the matching unit price is relatively low, we expect the gross profit margin of this business to be as high as 50%. At the same time, Yihe has become the second-tier supplier of all Model Y rear seats in Tesla, Inc. North America through Foggia since 2020, and we expect this business to contribute HK $140 million in revenue growth this year, with a gross profit margin of about 27%. All Tesla, Inc.-related income comes from North America, making it easier for investors to spread the risk of a possible shutdown in China because of the epidemic.
Great Wall Motor is expected to become another important growth engine. Yihe has received more and more orders since supplying chassis stamping parts for tanks 300 and Great Wall guns to the Great Wall's Chongqing factory, and this year's investment in the Jingmen plant of the Great Wall will bring a significant increase in revenue and profits to the 100 million and underutilized Wuhan plant. We expect Great Wall to become Yihe's largest single customer this year, with its revenue contribution roughly doubling to about HK $600 million year-on-year.
Office automation business is steadily improving. The withdrawal of some office automation equipment parts and integral manufacturing foreign-funded enterprises from China will bring new development opportunities for Yihe's office automation business, especially the whole machine assembly business is expected to grow substantially. We predict that the company's office automation equipment revenue will grow by 15%, 20%, 6%, and net profit by 72%, 31%, 42%, respectively, in fiscal year 22-24.
Valuation / risk hint. Our target price of HK $3.00 is based on segment valuation, of which the target price for the auto parts business is HK $2.34, based on 20 times the forecast price-to-earnings ratio for fiscal year 22, and the target price for office automation is HK $0.66, based on 8.5 times the forecast price-to-earnings ratio for fiscal year 22. The main risks to our ratings and target prices include lower-than-expected revenue and profits, and lower-than-expected operating rates as a result of the closure of the epidemic.
