The domestic leader in industrial control connectors, and the development of both automotive and new energy connectors. The company has been deeply involved in industrial control connectors for nearly 20 years, forming a product line with multiple application scenarios such as board-to-board and wire-to-board, servo motors, PLCs, industrial computers, etc., and has won major customers through customized development, platform-based production, and differentiated competition, and established a leading position in segmentation. The company entered the automotive field in 2010, focusing on medium and low voltage signal connectors for three-electric systems. In 2015, it entered the field of new energy, with photovoltaic inverters as the main application. In 2020-2022, the company's development was accelerated. Operating performance and profitability improved steadily at the same time. The CAGR of operating income and net profit was 32.53% and 35.54%, respectively. In 2022, the company invested in three additional subsidiaries. The original subsidiary Kunshan Weikang built a new production base to expand production capacity and develop and serve local customers. At the same time, the company actively develops and reserves high-voltage, high-frequency high-speed connectors, which is expected to benefit from the increase brought about by the trend of vehicle electrification and intelligence.
Industrial automation boosts demand for industrial control connectors, and automobile and new energy connectors can be expected to grow. With the rapid development of new business formats such as Industry 4.0, new energy vehicles, and clean energy, the global connector market is expected to exceed 90 billion US dollars in 2023. (1) Industrial control connectors: Industrial control connectors have been working in complex environments such as vibration and high temperatures for a long time. Customer needs are diverse, and the overall performance of the industry is “multi-variety, small-batch, and customized”. In the era of Industry 4.0, the industrial automation industry is developing rapidly. The global industrial automation equipment market reached US$191.89 billion in 2021. The development of industrial automation drives demand for industrial control connectors. In 2022, the global industrial connector industry market size was US$10.765 billion, an increase of 7.82% over the previous year, and the CAGR in 2018-2022 was 7.03%. (2) Automotive connectors: Domestic sales of new energy vehicles rose rapidly to 6.872 million units in 2022, up 95.95% year on year, and the penetration rate of new energy vehicles reached 30% +. Under the trend of vehicle electrification and intelligence, high-voltage and high-speed connectors have become the main growth of automotive connectors. The global automotive connector market is estimated to be about 19.5 billion US dollars by 2025. (3) New energy connectors: The scale of photovoltaic installations has expanded, and the new energy connector market has entered an upward cycle. The global demand for photovoltaic connectors is estimated to reach 1,246 billion pairs in 2030.
High-quality customers and customization build a stable moat, and cutting-edge layout has a first-mover advantage. (1) Customer advantages: The company is committed to developing and connecting high-quality customers. In the field of industrial control, Huichuan is the main terminal manufacturer, Tyco is the main brand, and the new customer Siemens has successfully introduced; in the automotive sector, it has established good cooperative relationships with automakers such as BYD and parts suppliers such as Ambofu; in the field of new energy, customers cover inverter and accessories manufacturers such as Sunshine Power, Goodway, and SMA. (2) Advantages of customization and mold development: The company has rich products, more than 15,000 product numbers, and has formed a standard product case library. Through secondary development and customization of semi-finished products, it responds quickly to customized needs. The company's precision manufacturing has reached world-class standards, and independent mold development has built its core competitiveness. (3) First-mover advantage in cutting-edge fields:
Industrial control connectors have been extended to robot application scenarios, and the company has successfully achieved mass production of industrial robot control connectors such as WAFER series connectors and WD series wire-to-board connectors. The company actively expands application scenarios for automotive high-frequency high-speed connectors, realizes mass production of 0.635mm and 0.8mm board-end high-speed connectors, and focuses on deploying high-speed wire harness connectors through its subsidiary Dongguan Weikang Automobile, thus reducing technological costs and accelerating domestic replacement.
Investment suggestions: We are optimistic about the company's market position as a leading domestic industrial connector and its business growth in the automotive and new energy fields. It is estimated that in 2023/2024/2025, the company will achieve operating income of 5.68/7.67/1,018 billion yuan, net profit of 1.52/1.83/252 million yuan, corresponding to PE 38/31/23 times, respectively. First coverage, giving the company a “buy” rating.
Risk warning: Downstream demand falls short of expectations, international trade risks, and increased industry competition.