The invisible king of the stamping industry is gradually deploying new energy and integrated die casting. The company was founded in 1992 and began to gradually explore the field of auto parts in the same year. Currently, it is mainly engaged in automotive stamping parts and stamping dies. Stamping parts products mainly include front and rear rails, A-column inner plates, etc., and have successfully expanded integrated die casting in 2023 and achieved mass production.
Stamping, the invisible king of customer quality:
1) The automobile stamping industry is mature, and the value of ordinary steel stamping bicycles is 10,000 yuan+. The entire vehicle manufacturing process is punched, welded and coated separately. Stamping is a front-end process with characteristics such as high production efficiency, high stability, high precision, and convenient process operation. Stamping parts can be used in car covers, white body, seats, instruments, exhaust and other systems. On average, each car has about 1,500 stamping parts, and the total value of a bicycle can reach 10,000 yuan+. Among them, body coverings with a relatively high value of single products, such as four doors, two covers, side walls, etc. are generally manufactured by OEMs (accounting for about 1/3 of the value of the vehicle's stamping parts), while white body structural parts such as runners, floors, and window frames are produced by suppliers (accounting for about 2/3).
2) High customer quality+excellent management and control make Dolly the invisible king. The company started by supporting SAIC Motor's car companies, and product quality and supply stability have been tested over a long period of time. The company received an ideal position in 2018 and became a Tesla supplier in 2019. It successfully bound two high-quality customers in the early stages of the new energy transformation. The two major customers accounted for 12% and 47% of revenue in 2022, respectively, laying the foundation for the company's high capacity utilization rate. The company generated a per capita revenue of 2.6 million yuan/person in 2022, significantly higher than that of its peers (800,000 to 1 million yuan/person). On the one hand, it benefits from the high unit price of products, and on the other hand, it also reflects the company's superior level of automation in the industry. The high capacity utilization rate and high automation rate stabilized the company's gross margin at 25%, leading the industry. The period cost rate was about 6.5%, which was 1.5-2.0PP lower than the average of peers. In the end, the overall profitability of the company was significantly superior to that of its peers.
Die-casting, a new star in die-casting with great potential:
1) In line with the general trend of integrated die casting, the industry's CAGR is expected to be 122% in the next 3 years. Tesla is leading the trend of integrated die-casting, and lightweight and cost-effective driving domestic OEMs such as NIO, Xiaopeng, Jikkrypton, and Celis to follow. It is estimated that the domestic integrated die-casting market space will grow from the current 1.6 billion yuan to over 17 billion yuan in 2025, with a CAGR of 122% and about 150 billion yuan in 2030.
2) Dolly's structural parts experience+imported equipment create pioneering and differentiated advantages. Most of the participants in integrated die-casting are traditional die-casting companies, and the market will worry about whether stamping companies can succeed in die-casting. As far as die-casting companies are concerned, most of them start with small to medium die castings. New energy sources generate demand for large and small electric casings, but the products are basically designed and produced according to the structure of a certain component, and are less often linked to the overall structure of the car body. As far as Dolly is concerned, its main products currently include steel and aluminum stamped body structural parts. Their understanding of vehicle design and structure will be superior to that of most die-casting peers with no experience in the production of structural parts. This will empower the company to improve the yield and efficiency of integrated die-casting. Furthermore, in the field of traditional medium and small die-casting machines, imported equipment such as Bühler from Switzerland and Toshiba from Japan has been recognized by the industry in terms of stability and product yield. Dolly chose imported Bühler equipment for large-scale die-casting machines, combined with continuous optimization of the die-casting process with customer order support, and is expected to achieve a better breakthrough in the field of integrated die-casting.
Investment suggestions: The company is deeply tied to Tesla and ideal two major customers, and also supplies new energy customers such as NIO, Zero Run, and Gaohe. Although SAIC Motor's business may face some pressure, new forces/new energy/integrated die-casting orders are still expected to support the company's future growth. We expect the company's net profit from 2023-2025 to be 540 million, 620 million, and 7.1 billion yuan respectively, +21%, +15%, +14%, and a CAGR of 17% over the same period last year. The core customer of the company's stamping parts business is Tesla, Ideal, whose structure is superior to its peers. It is also one of the few companies in the stamping industry that has carried out integrated die-casting transformation, so it is expected to enjoy a certain valuation premium. Comprehensive stamping is comparable to the company valuation and the average valuation premium level of integrated die casting. We gave the company a PE valuation of 20 times using EPS in 2023 as a benchmark, corresponding to a market value of 10.8 billion yuan and a corresponding target price of 58.9 yuan, covering the “recommended” rating for the first time.
Risk warning: macroeconomic and domestic consumption fell short of expectations, raw material price increases exceeded expectations, and the volume of integrated die-casting business fell short of expectations.