Incident Overview
On 24/4/11, the company announced that Hongxing Leather, a subsidiary of Societe Generale Technology Holdings, recently obtained a “fixed notice” for leather interiors for a model project from an automobile OEM to supply customers with leather interiors. According to the customer's plan, the project is expected to begin in March 2025. The project life cycle is 5 years, and the total estimated life cycle amount is RMB 1 billion.
Analytical judgment:
According to the company's announcement, the expansion of this OEM will help spread risk and make Hongxing Auto Leather's market base in the automotive interior leather business more stable. According to the company's customs records, Hongxing Auto Leather's main customers are domestic new energy manufacturers, such as Ideal Auto, NIO Auto, Wenjie Auto, etc. In the future, Hongxing Auto Leather is expected to strengthen cooperation with original customers, actively bid for new models from original customers, and also actively explore new customers. Brands such as BYD, Guangzhou Automobile, SAIC, and Jikkrypton are also target customers for Hongxing Auto Leather's expansion. In the long run, Hongxing is still expected to use the raw material cost advantages and customer resource advantages of listed companies to increase its share.
Investment advice
According to our analysis, (1) in the short term, Hongxing benefits from high sales growth from major customers, and Hongxing's stable position among large customers. We estimate that according to Hongxing's current production capacity, it can meet the revenue space of 10-1.2 billion yuan; (2) in the medium term, Baotai and Indonesia are expected to become new growth points; (3) in the long run, Hongxing is expected to fully benefit from the trend of domestic automobile interior replacement, and is expected to account for half of the revenue from the main business in the future.
Maintaining the previous profit forecast, revenue for 23-25 is expected to be 26.7/30.4/3.38 billion yuan, and the net profit due to mother for 23/24/25 is estimated to be 2.38/286/346 million yuan, corresponding EPS for 23-25 is 0.82/0.98/1.19 yuan, and the closing price of 11.42 yuan on April 11, 2024 corresponds to PE of 14/12/10X for 23/24/25, respectively, maintaining a “buy” rating.
Risk warning
Risk of automobile customer sales falling short of expectations, risk of fluctuating raw material prices, risk of new customer orders falling short of expectations, systemic risk.