Deeply cultivate the braking system and wire-controlled chassis. Product side: The company is a leading domestic automobile braking system. It has now formed three major business layouts: mechanical brake+intelligent electronic control+mechanical steering, with wire-controlled chassis. Client: The company's customer structure has gradually been upgraded from independent brands such as Chery, Geely, and Changan for mechanical brakes to new forces, joint ventures and global platforms such as Ideal Intelligent Electronic Control, Cyrus, Dongfeng Nissan, Jiangling Ford, and the lightweight SAIC-GM, GM North America, and Volvo Europe. Performance side: Excellent performance. The CAGR of the company's revenue and profit reached 28.5% and 34.5% respectively in 2014-2023.
The time is right to upgrade the intelligent electrification drive to replace domestic production. The company has laid out many businesses such as braking, steering, suspension, and weight reduction, and is expected to seize the opportunity in commercializing online control chassis. Braking system: EPB's load rate in 2022 has exceeded 80%, and the industry has entered the 10-100 stage. The company's market share in 2023 is about 13.2%. It has entered the American and Japanese systems, and domestic replacement continues to accelerate; one-box accounts for the mainstream route in EHB, the loading rate is about 24.3% in 2023, and the fixed market share of the company's project is about 37%. It is expected that it will benefit from the continuous cost reduction of WCBS1.0 and the launch of WCBS2.0. The market share, especially the market share of mid-range and high-end models above 200,000, continues to increase; EMB controls the future direction and is currently not mass-produced due to technical reasons. The company completed the first round of functional sample research and development in 2023, and plans to invest 280 million yuan to lay out production capacity in advance to fully prepare for long-term development.
Steering system: Wire-controlled steering is an inevitable development direction under the requirements of advanced autonomous driving. The company acquired Zhejiang Wanda's drive-in steering system. Currently, research and development of DP-EPS, R-EPS, and wire-controlled steering systems is progressing smoothly. Suspension system: The suspension structure has been upgraded from passive to active. Currently, air suspensions penetrate to middle and low end models, and the industry load rate is nearly 10%. The company has carried out distributed drive and suspension development work. Lightweight: New energy vehicles are in urgent need of lightweighting. Product-side companies have expanded from aluminum steering joints to products such as control arms, cast aluminum brake calipers, wheel housings, subframes, etc.; clients have expanded their business to global platform customers and consolidated their global layout in advance. Currently, the total amount of overseas orders is about 141 billion yuan.
Refinancing to expand production capacity increases investment in wire-controlled chassis. The company's January 2024 convertible bond plan is to raise 2.83 billion yuan for EMB, wire-controlled chassis, EPB and Mexican production capacity construction, which can effectively reduce the current situation of tight production capacity, maintain the leading edge in technology and share in the field of line control, and accelerate the global layout. The company's previous financing projects have progressed smoothly. Among them, the 2018 IPO projects have all been successfully implemented, and the actual benefits have exceeded expectations; the 2019 convertible bond raising project was gradually implemented in the second half of 2023, contributing to revenue and profit growth.
Investment suggestion: The company is an independent leader in line control, with high product technical barriers and continuous upgrading to continuously strengthen its competitive advantage; currently deepening its layout in the fields of steering, suspension, distributed driving and weight reduction, it is expected to gradually grow into a chassis platform-based enterprise. The company's revenue for 2023-2025 is estimated to be 76.6/100.8/13.98 billion yuan, net profit to mother is 9.2/12.3/1.82 billion yuan, corresponding EPS of 2.1/2.8/4.2 yuan, corresponding to the closing price of 63.7 yuan/share on February 27, 2024, PE is 30/22/15 times, respectively, maintaining the “recommended” rating.
Risk warning: Vehicle sales fall short of expectations; competition intensifies; raw material prices rise; customer expansion falls short of expectations; overseas expansion falls short of expectations, etc.