We covered Ruisheng Technology (the “Company”) for the first time, with a target price of HK$25.74 and a “buy” investment rating.
We forecast earnings per share for the 2023-2025 fiscal year of RMB0.453/RMB1.104/RMB1.571, respectively. Considering the valuation level of peer companies, we gave the company a 2025 price-earnings ratio of 15.0 times.
Through the acquisition of Prime Speaker Systems (PSS), a leading company in the international industry, a new growth curve has been highlighted. The automotive sector is affected by vehicle regulations, the certification cycle is long, and the barriers are deep; moreover, in recent years, there have been more domestic and foreign automotive electronics players, and competition in the industry is fierce. The trend of diversification of automotive functions has led to the development of automotive acoustic products to the high-end, and the volume and price of automotive acoustic products have risen sharply, leading to huge market growth. Through the acquisition of leading global automotive speaker suppliers, the company has successfully achieved a diversified strategic layout, achieved a leading position in the industry, and opened a new growth curve.
We believe that this acquisition will effectively make up for the company's limitations as a consumer electronics company card car acoustics circuit; given the company's own leading global acoustics advantages combined with PSS's leading position in the high-end automotive acoustics market, customer expansion and order scale are expected to exceed expectations. Currently, the advantages of domestic suppliers mainly lie in local supporting capacity and a relatively complete supply chain, and they still have obvious disadvantages compared to foreign brands in terms of technical reserves and brand influence. After acquiring PSS, the company can not only effectively utilize its 50-year technology accumulation and global service structure, but also combine the company's own local influence, the cost advantages brought by self-produced raw materials and flexible automated production lines, and the R&D advantages brought by the industry-university-research model, which is expected to unleash greater synergy effects in the future.
Therefore, we believe that after the company acquired PSS, the depth and breadth of market expansion is expected to exceed expectations.
Catalysts: Advancing acquisition progress; penetration of the automotive acoustics business into the supply chain of more automakers.
Risks: The acquisition of PSS did not go smoothly; demand from the consumer electronics market fell short of expectations; demand from the automotive industry fell short of expectations.