Main points of investment:
The company's customers are of high quality and have outstanding ability in mold and precision manufacturing.
The company is a large-scale private independent brand enterprise focusing on the R & D, production and sales of automobile and mobile phone connectors and shields, and has established stable cooperative relations with major customers such as Valeo, Keshida and BYD. the products are used in the models of Volkswagen, Mercedes-Benz, General Motors and other international big-name manufacturers. The company has strong mold development and precision manufacturing capabilities, with about 150 sets of shield mold, 50 sets of precision connector stamping mold, 30 sets of connector injection mold and 30 assembly lines for the design, processing, manufacturing and testing capabilities of automation equipment and fixtures needed per month. the development cycle of precision stamping mold can be compressed to 7-10 days at least.
Expand production and layout in the field of new energy vehicles
By 2020, the company has a production capacity of 383 million automotive products and 1.023 billion mobile phone products. In 2022, the company raised about 700 million yuan through non-public offerings to produce and develop new energy vehicle connector products. The project is expected to reach production in 2026. After reaching production, it will increase the annual production capacity of 5 million high current and voltage connectors for new energy vehicles and 12 million (sets) of auxiliary driving module connectors.
Equity incentive shows confidence
In 2023, the company granted 3.2832 million stock options to the company's core managers and business backbones, accounting for about 1.00% of the company's total share capital, with an exercise price of 11.69 yuan per share, of which 2.6216 million stock options were granted for the first time. The exercise assessment year of stock option is three fiscal years from 2023 to 2025, the assessment standard is based on business income in 2022, and the compound growth rate of each examination period is not less than 50%. We estimate that if the performance evaluation target of equity incentive is met, the company's operating income from 2023 to 2025 will need to reach at least 13.97max 20.95 / 3.142 billion yuan respectively.
Earnings forecast, valuation and rating
We estimate that the operating income of the company from 2023 to 2025 will be 14.09 yuan 21.14 / 3.159 billion yuan respectively, with a corresponding growth rate of 51.45%, 49.97%, 49.47%, 1.09, 1.61 and 237 million yuan, respectively, with a corresponding growth rate of 59.23%, 47.83%, 47.51%, and 51.43%, respectively, with a 3-year CAGR of 0.33 and 0.490.72 yuan per share. In view of the company's continued expansion of production capacity, the performance is expected to enter the release period, we use the PEG method for valuation. We estimate that the company's net return profit in the next three years will be 51.43%, giving the company 50 times PE in 2023, corresponding to the target price of 16.57 yuan, covering for the first time and giving it a "buy" rating.
Risk hint: downstream demand is lower than expected risk, industry competition aggravates risk, technology research and development is less than expected risk, capacity construction progress is not as expected as expected risk.