Investment advice
Tesla began mass production of ADAS cleaning systems, and Valeo began selling ADAS cleaning system kits. As a representative of the ADAS cleaning industry, the company is expected to benefit from the rise of the racetrack.
rationales
Tesla and Valeo entered the market one after another, and the industrialization of ADAS cleaning systems accelerated. 1 According to foreign media reports, Tesla updated the system version and added camera cleaning software and hardware to ensure driving safety and improve Autopilot smart driving reliability. The Cybertruck front bumper camera is equipped with camera self-cleaning and heating functions. We anticipate that the ADAS cleaning system will be extended from CyberTruck to all new models, including the Model series, or become the standard solution for Tesla's Autopilot platform. As the Tier 1 representative for ADAS components, Valeo launched an ADAS cleaning system kit on the 4Q23 website, involving camera cleaning, radar cleaning, and solenoid valves. We believe that Tesla and Valeo have entered the market and are mass-produced with ADAS cleaning systems, which is an industry landmark, and the industrialization of the ADAS cleaning system 0-1 is accelerating.
Smart car safety systems are the core standard, and the value of a bicycle exceeds 1,000 yuan. Along with the penetration of advanced smart driving, smart driving systems act as “drivers,” and sensors such as cameras and lidar face many challenges such as dust, dirt, and frost as the “eyes” of smart cars. Once the image is blurry while driving, the risk is comparable to “driving for a blind person.” We believe that the ADAS cleaning system can ensure the continuous use of sensors such as cameras and radars, effectively guarantee driving safety and improve the reliability of smart driving systems; with the liberalization of advanced smart driving policies, it is expected to become a standard solution for smart car safety systems. Due to the large number of sensors, easy damage, and precision, ADAS cleaning systems have the characteristics of multiple components, high barriers, complex systems, etc., involving multiple components such as automatic sensing pumps, telescopic mechanisms, heating modules, sensing control systems, solenoid valves, nozzles, and pipelines. The bicycle support value exceeds 1,000 yuan, which is 10-15 times that of traditional cleaning systems. We believe that driving safety is no small matter, and the ADAS cleaning system is expected to become the standard safety system in the smart car era, with a global market space of tens of billions of yuan.
With deep technology and customer accumulation, ADAS cleaning is leading the industry. The company has been working in the field of micromotors and traditional cleaning systems for decades, and has accumulated deep technology and industry. It has many core patents in the field of ADAS cleaning, has been jointly developed with Valeo for many years, and has cooperated deeply with many domestic and foreign OEMs and Tier 1 companies. We believe that with its deep accumulation, the company is expected to benefit from the rise of the racetrack and enter a period of rapid growth in performance.
Profit forecasting and valuation
Considering Tesla and Valeo's drive to the industry and the company's mass production of new products, we raised 2023/2024 net profit by 4.8%/8.4% to 220/302 million yuan, and introduced a net profit forecast of 405 million yuan for 2025. The current price corresponds to the 2024/2025 price-earnings ratio of 22.9x/17.1 times. Maintaining the outperforming industry rating, taking into account the increase in profit and the upward shift in the industry valuation center, the target price was raised by 30.3% to $112.03, corresponding to the price-earnings ratio of 29.8 times/22.2 times in 2024/2025, with 29.2% upside compared to the current price.
risks
The penetration rate of ADAS cleaning systems fell short of expectations, and sales volume in the NEV market fell short of expectations.