A well-known supplier of small to medium automotive fasteners, driven by both automotive and aerospace industries. The company is a leading supplier of small to medium fasteners in China, and its product terminals are supported by many leading automobile OEMs.
In 19-22, the company's revenue increased from 307 million yuan to 470 million yuan, and the CAGR reached 11.7% during the period; due to factors such as production capacity bottlenecks and the slowdown in demand for traditional fuel vehicle fasteners, the revenue growth rate slowed in '23, and the profit side was under pressure; however, with the smooth expansion of new energy vehicle customers and the gradual delivery of orders in the aerospace sector, the company is optimistic that the company will reach an inflection point in performance in '24.
Automobiles: New energy vehicle customers are expanding smoothly, entering Mexico to open overseas markets. Domestic: While demand for traditional fuel vehicle fasteners is slowing down, the company is actively expanding customers in the field of new energy vehicles and has successfully entered many well-known manufacturers. According to the company's investor exchange records, the company's NEV business currently accounts for about 30% of revenue (up nearly 20 pcts from '22). Overseas: According to the announcement, the company plans to build an overseas warehouse at the Mexican plant and is expected to complete it in 23Q4 to enter overseas markets. Mexico has many automobile tier 1 suppliers, such as Magna and Valeo; the company is expected to drive high growth in automobile export business through early overseas customer relationships and the high cost performance ratio of products. The company's automobile business revenue is estimated to be 3.83/5.62 billion 62/692 billion yuan in 23-25, +7%/+49%/+25% over the same period last year.
Aerospace: Downstream orders are plentiful, and low-orbit satellites are expected to open up new space. The company acquired Chengdu Xinyue in March '22 to enter the aerospace machining field (current shareholding ratio is 62.68%); under the influence of many factors in 22-23, the aerospace business was under pressure. Currently, the company's downstream bidding has entered the normal state, and orders are full. We are optimistic that the company's aerospace business revenue will continue to grow. Furthermore, according to investor exchanges and responses, the Chengdu Crescent business involves commercial space rockets and low-orbit satellites. Currently, it has received orders for commercial space rocket parts and delivered them to customers in small quantities, and is expected to benefit from the boom in the low-orbit satellite industry in the future.
Equity incentives demonstrate confidence in high performance growth. The company issued equity incentives in August '22, which incentivized 1,669,000 shares (1.6% of total share capital), and the grant price for restricted shares was 11.69 yuan. The equity incentive assessment requirements are based on revenue in '21. The revenue growth rate in 22-25 is not less than 17%/50%/85%/120%, or the net profit growth rate is not less than 5%/20%/50%/80%.
Profit forecasts, valuations, and ratings
We expect the company's revenue to be 502/7.56/957 million yuan and net profit of 0.44/1.06/148 million yuan in 23-25, corresponding PE 78/32/23 times. The company was given 27 times PE in 25 years, with a corresponding target price of 38.34 yuan, covering the “buy” rating for the first time.
Risk warning
Aerospace business bidding falls short of expectations; risk of automobile sales falling short of expectations; risk of factory production capacity falling short of expectations; risk of loss of important customers; risk of lifting the ban on restricted shares.