Investment summary:

The company has formed a “dual engine” driven development pattern for the lightweight automotive metal parts industry and the general aviation aircraft manufacturing industry. Before listing, the company's main business was R&D, manufacturing and sales of automotive aluminum alloy wheels. After listing, the company extended its industrial chain and expanded its market size through mergers and acquisitions of high-quality assets. Currently, it has set up manufacturing bases and R&D centers in 10 countries around the world, and has built 19 production bases in 7 provinces and cities in China, achieving complementary advantages. According to the company's 2022 performance forecast, net profit for the full year of 2022 was 78-880 million yuan, an increase of 134%-164% over the previous year.

The automotive metal parts lightweight business continuously optimizes the market structure, gives full play to the application advantages of magnesium and aluminum alloy lightweight technology, and increases customer support, especially the supply of lightweight components for new energy vehicles. The company's aluminum alloy business has built a “25317+N” market layout, with a global market share of 4.5%. It is actively on the NEV circuit, cooperated with mainstream NEV companies such as BYD, Tesla, Rivian, NIO, Xiaopeng, Ideal, and Zero Run, and its performance has steadily picked up. Its magnesium alloy die-casting parts supplier is the world's largest supplier of magnesium alloy die-casting parts, with a market share of 65% in North America. Mature R&D products weigh about 100 kg, involving small parts within 1 kg, such as steering wheels, steering column mounts, and seat brackets; large 3-5kg instrument panel brackets; 5-10kg side door panels and rear hatchback interior door panels. At the same time, the company's gearbox transfers, transfer case covers, engine mounts, etc. have all been used maturely in North America, and automobile chassis parts such as shock absorber towers and bottom plate beams have all been prepared and implemented. With the supply and release of upstream magnesium, magnesium prices are expected to fall, demand for lightweight downstream vehicles is strong, the penetration rate of magnesium alloys is gradually increasing, and the company's first-mover advantage is obvious.

General Aviation's aircraft manufacturing business has good orders and is operating steadily, making it one of the world's top three piston aircraft manufacturers. Its Diamond Aircraft has leading-edge technological R&D advantages in the fields of overall aircraft design and development, engine manufacturing technology, new material technology and advanced manufacturing. A total of 239 aircraft were delivered in 2022, with a unit sales price of 757,000 US dollars. Sales of private consumer aircraft DA50/DA62 increased rapidly. In the future, the company will speed up the release of production capacity at the domestic Qingdao production base, introduce new models and new card slots in an orderly manner, accelerate the localization of general aviation aircraft manufacturing, and help the development of the domestic general aviation industry.

Investment advice:

We forecast the company's revenue for 2022-2024 to be 15.526 billion yuan, 17.351 billion yuan, 19.686 billion yuan, an increase of 24.84%, 11.76%, and 13.46% over the previous year. Net profit attributable to the mother in 2022-2024 was 844 million yuan, 1,073 million yuan and 1,301 million yuan, up 153.18%, 27.1% and 21.26% year-on-year. Combining comparable company valuations, the company was given 20 times the PE valuation in 2023, corresponding to a stock price of 10.02 yuan and a market capitalization of 21.455 billion yuan. The company was covered for the first time and a “buy” rating was given.

Risk warning:

Automobile sales fell short of expectations; general aviation aircraft sales fell short of expectations; overseas business risks; rising raw material prices; risk of exchange rate fluctuations.