Leading domestic lightweight conveyor belts, high-end precision molding high-quality supplier company is the largest lightweight conveyor belt manufacturer in China. Its main business is steady and solid. It has entered the high-end precision molding industry through outreach mergers and acquisitions, providing the company with room for growth. In 2018, the company produced and sold 4.3 million square meters of light conveyor belts, with a market share of close to 6%, ranking first in the country. The gross margin of conveyor belts remained around 40%. Strong and steady profitability laid a solid foundation for the company's main business. In 2015-2016, the company successively acquired 100% of the shares of Yingdong Molding and Weifeng International, completing the high-end precision molding layout, providing the company with increased performance and opening up a broad new space for growth.
Yingdong Molding: Focusing on automobiles and home appliances, continuing to benefit from Tesla's localized Tesla Tier 1 suppliers, focusing on high-quality domestic high-end automobiles and home appliances customers, there is plenty of room for growth. Yingdong Molding became Tesla's supplier in 2015, supporting battery module accessories and interior and exterior decoration products, covering Tesla Model S, Model X, Model 3 and other models. In 2019, the company received an order of 75 million yuan from Tesla. As production capacity climbs at Tesla's Shanghai plant and the localization of Model Y progresses, the company will continue to benefit from Tesla's localization.
Weifeng International: Apple, Lego, and Xiaomi (Stone Technology) are all bound to leading middle and high-end consumer companies, and their profitability is strong. Weifeng International is a multinational enterprise focusing on the production of high-precision plastic molds and parts. High-quality customers include high-end consumer product giants such as LEGO, Apple, and Stone Technology. Due to the high quality and stability of customers, the company's profitability is strong, and the net interest rate remains at 15%-20%. In 2017, Weifeng began supplying precision plastic parts to Xiaomi's intelligent sweeping robot (Stone Technology OEM), and contributed more than 10% of revenue. Stone Technology is one of the company's important customers. Benefiting from the growth of the middle and high-end consumer goods market, Weifeng's performance growth has entered a fast track.
Investment advice
We believe that the company's light conveyor belt business has established a solid main business, and that the high-precision molding business binds high-quality customers and provides room for growth. In the future, the company will continue to benefit from the localization of Tesla and the middle and high-end consumer markets such as Apple, Lego, and sweeping robots. The company's EPS in 2019-2021 is expected to be 0.31 yuan, 0.36 yuan, and 0.47 yuan, and the corresponding PE will be 23.1 times, 19.5 times, and 15.1 times, giving the company a “buy” rating.
Risk warning: New customer expansion falls short of expectations, Tesla's localization falls short of expectations, and the intelligent robot vacuum cleaner market falls short of expectations