It is expected that domestic automotive transmission systems and fluid pipeline system products will grow steadily. The company relies on imports to replace them, and is expected to continue to expand overseas supporting markets. In the field of transmission belts, major foreign players include ContiTech, Hutchinson, Gates, etc.; in the field of tensioners, major foreign players include Schaeffler, Leiden, etc. In the field of fluid pipelines, major foreign players include ContiTech, Hutchinson, etc. In the field of transmission systems, the main domestic competitors include Sanlix and Sanwei Co., Ltd. In the field of fluid pipeline systems, major domestic competitors include Peng Ling Co., Ltd. and Chuanhuan Technology. According to the average replacement rate of major products in the automobile usage and aftermarket, new production and ownership of automobiles, and new production and ownership of commercial vehicles, etc., it is estimated that the market space for automobile transmission belt products in China will reach 1.78 billion yuan in 2025, and the CAGR for 2020-2025 is 3.2%; the market space for tensioner products is expected to reach 4.45 billion yuan in 2025, and the CAGR of 3.2% in 2020-2025. With cost control advantages, localization advantages, etc., it is expected that the company will continue to expand its global market share and achieve rapid growth.
Transmission system product business: It is expected that production capacity expansion will ensure rapid profit growth. Expanding overseas after-sales business is a growth point. With continuous investment in R&D and stable product quality, etc., the company's products have gradually entered supporting systems such as SAIC, FAW, Geely, Changan Automobile, and Dongfeng Nissan; as technical advantages and vehicle support experience continue to accumulate, the company's transmission system products have been supported by KAH, Bosch, Schaeffler, Michelin, etc. The company actively explores overseas after-sales service markets and cooperates with Russia's LN DISTRUBTION, Bosch, Michelin, etc., and the share of sales revenue in the after-sales service market for transmission system products continues to increase. In order to break through the bottleneck in the production capacity of transmission system products, investment in the construction of an intelligent transmission belt factory construction project and the Zhang Jinglun production expansion project will guarantee rapid profit growth.
Fluid pipeline business: expand categories and customers to achieve rapid growth. The company's fluid pipeline products are also compatible with passenger cars and commercial vehicles. Passenger vehicle customers mainly include SAIC, FAW, Geely, etc. Commercial vehicle customers include Navistar, Scania, FAW Jiefang, Sinotruk, Cummins, and ASSP, with rich customer resources. The company is actively developing technology and product reserves in the field of new energy vehicle technology, developing products such as pure electric vehicle cooling pipelines, battery pack coolant pipelines, hydrogen fuel delivery pipelines, etc., and has obtained project targets for new energy models such as SAIC Chase and Geely Automobile's Ideal Automobile, and achieved rapid growth in categories and customers.
The capital raised is mainly used to expand the production capacity of transmission system products. The company plans to raise a total capital investment of 436 million yuan through the issuance of new shares, and plans to invest 295 million yuan in the transmission belt smart factory construction project. Through the construction of new plants, workshops and related supporting facilities such as water and electricity, and the purchase of equipment to expand production line construction, it is expected that the production capacity of transmission belts will be increased by 20.4 million units/year; the Zhang Jinglun expansion project plans to invest 84.9356 million yuan, which is expected to add 8.4 million units/year to Zhang Jinglun's production capacity.
The company's net profit for 2023-2025 is predicted to be 158 million, 1.96, and 241 million yuan respectively. Since the company has achieved profit and stable cash flow, PE and DCF valuation methods were selected to value the company. We believe that the reasonable overall market value range for the next 6-12 months after the company's current public offering of shares is 2181-2,411 billion yuan, and the reasonable valuation range per share for 6-12 months is 27.27-30.14 yuan, assuming no over-allotment options are used.
According to the 2022 audited net profit calculation, the corresponding PE range is 21.34-23.58 times; the corresponding PE range is 24.16-26.71 times; according to the 2022 audited net profit after deducting net profit, the corresponding PE range is 24.16-26.71 times; and according to the calculation of net profit predicted in 2023, the corresponding PE range is 13.81-15.26 times. As of October 24, 2023, the issuer's industry, the C36 auto parts manufacturing industry, had a static average price-earnings ratio of 26.54 times in the past month.
Risk warning: Core hypothetical risks: risk of declining revenue growth rate of transmission belt products, risk of declining revenue growth rate of tensioner products, risk of declining revenue growth rate of fluid pipeline products, risk of consolidated gross margin falling short of expectations; other potential risks: valuation risk, risk of raw material price fluctuations, exchange rate fluctuation risk, accounts receivable recovery risk, fund-raising project risk, etc.