Investment highlights
For the first time, it covered Hengshuai Co., Ltd. (300969) and gave it an outperforming industry rating. The target price was 71.67 yuan, corresponding to 30 times P/E in 2023. The reasons are as follows:
It has been deeply involved in the industry for many years, and has outstanding cost control capabilities. Since its establishment in 2001, the company has focused on micromotors and cleaning systems, and is deeply tied to well-known OEMs and Tier 1 manufacturers at home and abroad, with high-quality customer resources. The company has insisted on creating a platform-based, automated, and self-made production strategy for core components. Profitability is far ahead of the industry. In 2022, the company's gross margins and net profit margins reached 32.3%/19.7% respectively. We believe that the company's high-quality customer resources and outstanding cost control capabilities are expected to provide a solid foundation for the continuous expansion and expansion of the company's business.
A core enterprise for automotive micromotors, the volume and price have risen sharply due to intelligent automobile electricity. The penetration rate of electric components such as the “four doors and two covers” of automobiles has increased, the design of components such as seats and displays has become more intelligent, new systems such as wire control technology have been gradually applied, consumer demand for quietness and intelligent control of motors has increased simultaneously, and the market volume and price of automotive micromotors has risen sharply. We estimate that the domestic passenger car micromotor market is expected to exceed 20 billion yuan in 2025. As a core enterprise in the field of micromotors, the company currently supports many leading international OEMs and Tier 1 manufacturers, and has developed into system assemblies based on single motor products. We believe that with product capabilities, cost control and customer advantages, the company is expected to grow into one of the leading enterprises for automotive micromotors.
Deploy ADAS sensor cleaning systems and expand thermal management system components. The company has expanded horizontally into the fields of ADAS sensor cleaning systems and thermal management through its accumulation in the field of automotive cleaning systems and micromotors. With the increase in autonomous driving levels and penetration rates, ADAS sensor cleaning systems have begun to be applied on a large scale. We believe that the bicycle value of cleaning systems is expected to increase from the current 60 yuan to over 1,000 yuan. Currently, the market is in its infancy, and the company is expected to quickly occupy the market with its traditional main business and first-mover advantage. In terms of thermal management products, the company has already achieved mass production and delivery of cooling manifolds to leading international OEMs. With the gradual implementation of electronic water pumps and other products, the company is expected to use cooling manifolds as entry points to integrate thermal management core components and systems.
What's the biggest difference between us and the market? The market is paying more attention to the development of the automotive micromotor business, and we think the company's ADAS sensor cleaning system and thermal management business expansion are also worth paying attention to.
Potential catalysts: New energy vehicle customer expansion exceeds expectations, new orders land, and the gradual expansion of ADAS sensor cleaning systems and thermal management services.
Profit forecasting and valuation
We expect the company's EPS to be 2.39/3.14 yuan in 2023/2024, respectively, and a CAGR of 31.3%.
The current stock price corresponds to 26.2/19.9 times P/E in 2023/2024. We covered it for the first time, giving the company an outperform industry rating and target price of 71.67 yuan, which has 14.6% room to rise from the current stock price.
risks
Fluctuations in raw material prices, new business development that does not meet expectations, customer concentration, industry policy adjustments, etc.