Key points of investment

Wanfeng Aowei: lightweight and general aviation two-wheel drive

The company was founded in 2001. After more than 20 years of development, it clearly proposed a “twin-engine” development strategy for the lightweight automotive metal parts industry and the general aviation aircraft manufacturing industry in 2020. The lightweight industry focuses on aluminum/magnesium alloys, transforming the technical advantages of traditional automobile lightweight parts into NEV market share. On the basis of consolidating the share of traditional auto parts, the proportion of NEVs and the supporting value of bicycles is continuously increased. The general aviation aircraft manufacturing industry uses the technical advantages of “Diamond” brand aircraft in the industry to expand domestic business by introducing new models and landing new bases on the basis of continuously expanding foreign general aviation aircraft markets. Develop new application scenarios based on the aviation school training application market to promote the development of the domestic general aviation industry.

Welcome to the era of lightweight magnesium alloys

The trend of lightweight automobiles has led to an increase in the use of magnesium alloys. In 2020, China released the “Energy Saving and New Energy Vehicle Technology Roadmap 2.0” (hereinafter referred to as “Roadmap 2.0”), which put forward requirements for weight reduction for all types of vehicles. By 2035, the weight reduction coefficient of vehicles ranges from 15%-35%; automobile lightweighting is the general trend.

Range is one of the core indicators consumers pay attention to when purchasing new energy vehicles. In 2023, the Beijing Consumer Association released the “New Energy Vehicle Consumption Survey Results”. The survey showed that more than half of the respondents required a range of more than 500 kilometers for new energy vehicles, over 30% wanted a range of 400 to 500 kilometers, and only 15.59% of respondents accepted a range of 300 to 400 kilometers. The survey also showed that most consumers are interested in the policies and cost advantages of new energy vehicles; they are most concerned about inadequate charging facilities and insufficient range for new energy vehicles. Range is an important determinant of NEV pricing and consumers' willingness to buy them.

Currently, parts used for magnesium alloys in automobiles can be categorized into two categories.

(1) Shell type. Such as clutch housing, valve cover, instrument panel, transmission body, crankcase, engine front cover, cylinder head, air conditioner shell, etc.

(2) Stent type. Such as steering wheel, steering bracket, brake bracket, seat frame, car mirror holder, distribution bracket, etc.

According to data released by the National New Materials Industry Development Strategy Advisory Committee, the amount of magnesium alloy used in bicycles in China should reach 15 kg, 25 kg, and 40 kg respectively in 2020, 2025, and 2030, while the actual average amount of magnesium alloy used in bicycles in 2022 was only about 20% to 33% of the planned usage in 2020. Compared with plans and the amount of magnesium used in European and American bicycles, the amount of magnesium used in bicycles in China is clearly low, and there is great potential for future development.

General aviation business: the absolute leader in China, laying out new infrastructure

The company's acquisition of Diamond Aircraft became the absolute leader in the country, laying out new infrastructure. The holding subsidiary Aircraft Industry is a professional general aircraft manufacturer integrating independent R&D, top design, advanced manufacturing, sales and service with a global layout. It adopts an advanced business model of “R & D - licensing/technology transfer - complete aircraft manufacturing and sales - after-sales service” cycle. Its Diamond Aircraft has leading-edge technology research and development advantages in the fields of overall aircraft design and development, engine manufacturing technology, new material technology and advanced manufacturing. Currently, it has three aircraft design and development centers in Austria, Canada, and the Czech Republic, a provincial engineering research center in China, and three aircraft manufacturing bases in Austria, Canada, and China, making it a global leader in general aviation. Customers span Europe, North America, Asia Pacific and the Middle East. The main customers target flight schools, airlines, aviation clubs, private consumers, etc., and have a good brand influence on a global scale.

Profit forecasting and valuation

Our overall forecast for 2023-2025 is the company's revenue of 17.590 billion yuan, 19.555 billion yuan, and 22.514 billion yuan, up 7.37%, 11.17% and 15.13% year-on-year. Net profit attributable to the mother in 2023-2025 was 1,018 million yuan, 1,270 million yuan and 1,574 million yuan, up 25.82%, 24.74% and 23.96% year-on-year. Based on the valuations of comparable companies, the company was given 20 times the PE valuation in 2023, corresponding to a market value of 20.36 billion yuan. The company was covered for the first time and a “buy” rating was given.

Risk warning

Automobile sales fell short of expectations, and the advancement of downstream applications of magnesium alloy products fell short of expectations.