Key points of investment

A leading automotive welding line company in North America, its medium- to long-term performance is expected to accelerate. The company's predecessor was Changchun Economic Development. Wanfeng Jinyuan joined in 2018, acquired American Paisling in 2021, divested the original real estate business, and officially changed its name to “Paislin”. After the company acquired Paisling, the core team was largely retained, and experts in the automotive and automation fields gathered. The company's main business focuses on automated automotive welding production lines. Customers include internationally renowned automakers and first-class component suppliers in the automotive sector, as well as non-automotive warehousing and logistics customers. The company has manufacturing bases and R&D centers in Detroit, Changchun, Shanghai, Chengdu, Mexico, etc., and has the largest machining center in the Detroit region. The performance growth rate has clearly recovered since 2023. On the one hand, it has benefited from the continuous influx of large orders from North America, and on the other hand, it has benefited from the convenience of personnel mobility after the pandemic, increased multi-party collaboration in R&D, design and production around the world, and effectively improved operating efficiency and profitability levels.

The company's core benefits from the return of the North American manufacturing industry, and orders are expected to remain high. The US, Canada, and Mexico policy supports catalysis, and the NEV industry is expected to experience high growth. The introduction of the US IRA (“Inflation Reduction Act”) in August 2022 is expected to accelerate the transformation and commissioning of traditional US OEMs. Canada plans to stop selling new internal combustion engine cars by 2035. Mexico is a hot spot for automobile investment, and plans to build factories have followed one after another. Many car companies such as Tesla, BMW, and GM have announced their investment plans in Mexico. At this stage, the overall NEV penetration rate in North America is less than 7%, and NEV investment is expected to enter a stage of rapid growth. The company has benefited from the return trend of the North American manufacturing industry. On the one hand, it has sufficient project experience as an established automation integrator in North America. It ranks in the top three in North America, targeting international giants KUKA and Comau. Second, it is a core location for the construction of new production capacity. Mexico has built a large-scale production base, which has fully benefited from the wave of electrified construction in North America. Orders have increased significantly since last year.

Industrial automation has vast expanses, and humanoid robots open up space for imagination. The company has accumulated projects in the non-automotive sector. In recent years, the company has entered the field of warehousing and logistics, reached strategic cooperation with internationally renowned warehousing and logistics customers, and received more than 300 million orders in 2022. In the medium to long term, the company is expected to expand like pan-manufacturing in the non-automotive sector. The manufacturing industry needs customized industrial automation system integration according to different application scenarios to automate industrial production processes and realize processes or functions such as welding, assembly, handling, and sorting to replace labor to improve efficiency and product consistency, reduce costs, and ensure safety. In the context of manufacturing upgrading, the industrial automation integration market is expected to expand at an accelerated pace. We estimate that the global industrial automation system integration market is expected to reach 585/630/69 billion US dollars in 2022 to 2024, respectively. Furthermore, the AI model is progressing rapidly, which is expected to accelerate the implementation of intelligence and humanoid robots in the automotive field. Smart car manufacturers represented by Tesla are expected to lead the accelerated development of the industry. The terminal application space is broad, and technology-leading automation integration manufacturers are expected to significantly benefit from the dividends of the times brought by this round of AI.

Profit forecasting and valuation

We expect the company's revenue for 2023-2025 to be 19.95/29.97/4,045 billion yuan, with year-on-year growth rates of 78.39%/50.21%/34.96% respectively; net profit to mother for 2023-2025 will be 2.11/3.48/ 490 million yuan, respectively, with year-on-year growth rates of 48.03%/64.74%/41.01%, respectively. Considering that the company is a leading automated welding line company in North America, benefiting from the trend of electrification in North America, there is broad room for long-term growth in the non-automotive sector. For the first time, it was covered, and it was given a “buy” rating.

Risk warning:

Market competition increases risk; risk of policy changes, etc.