Key points of investment
Deeply involved in the automotive chassis parts sector, high-precision components, aluminum alloy lightweight, and heat-management-driven growth, the company's main business is mainly in the three major segments of chassis parts, aluminum alloy lightweight, and air conditioning compressors. It is in a leading position in the market in the steering gear rack and shock absorber piston rod industry.
Automobile chassis parts: Domestic substitution trends are increasing, expanding to high-precision parts. Automobile chassis consists of four parts: transmission system, driving system, steering system, and braking system. For a long time, established overseas parts suppliers have occupied the vast majority of the market, but as domestic suppliers have increased their supporting experience, domestic suppliers have gradually developed systematic supply capabilities. The company's chassis parts business is in a leading position in the more segmented steering gear rack and shock absorber piston rod industry. In the first half of 2023, the company's market share of steering gear and shock absorber parts reached more than 50%.
Lightweight aluminum alloy: Binding core high-quality customers, it is expected that the lightweight effect of rapidly releasing lightweight materials will be obvious in the future. Aluminum alloy has excellent mechanical and physical properties, low density and high toughness, and will gradually become the mainstream material. The company has the ability to supply lightweight aluminum alloy parts such as integrated valve terminals, battery pack connectors, Yoke components, control arms, air suspension-upper air chamber end covers, etc. Currently, it continues to promote the development and mass production of BYD's integrated valve terminals, while actively engaging with corresponding customers to develop more lightweight aluminum alloy parts products.
Air conditioning compressors: Electrification is driving the rapid growth of the thermal management market. According to intelligent research and consulting, China's NEV thermal management system market size in 2022 was about 50.4 billion yuan, an increase of 94% over the previous year. Further expansion of NEV production and sales in the future will drive demand for thermal management systems to continue to grow. The market size is expected to approach 100 billion yuan in 2025. Air conditioning compressors are the heart of automobile air conditioning and refrigeration systems. Currently, CR5 in the compressor market is 85%. Relying on early research and technical reserves on automotive thermal management, the company reached cooperation with Sany to develop integrated vehicle thermal management systems, continuously improve integrated thermal management system products, and lay a stable foundation for more vehicle integrated thermal management system market expansion and potential customer development.
Profit forecasting and valuation
We expect the company's net profit to be 0.6, 1.0, and 110 million yuan respectively in 2023-2025, with year-on-year growth rates of 40%, 55%, and 10%, respectively. The CAGR is about 31%, and the corresponding PE is 69, 45, and 40 times, respectively. Considering the company's leading position in the steering gear rack and shock absorber piston rod industry, and its development potential in the fields of precision parts, lightweight aluminum alloy, and air conditioning compressors, the first coverage gave it an “gain” rating.
Risk warning
New energy vehicle sales fell short of expectations, production capacity climbed short of expectations, and customer growth fell short of expectations