Hongxing Auto Leather received a fixed notice
Hongxing Auto Leather, a holding subsidiary of the company, 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.
The “Fixed-Point Notice” is the customer's recognition of Hongxing Auto's leather and leather interior development capabilities and supply qualifications. It does not constitute a sales contract; actual sales volume is related to factors such as the customer's actual production.
Hongxing Auto Leather's target for this new project is a new customer developed on the basis of the original customer.
Hongxing Auto Leather is now a leather interior supplier for many OEMs such as Ideal Auto, Wanjie Auto, and NIO Auto; this time, it has been recognized by new customers, making Hongxing Auto Leather more stable in the automotive interior leather business.
We believe that Hongxing's advantages on the NEV interior circuit are showing, and that its brand and delivery capabilities are gradually being recognized by more car companies and models. On the one hand, it has enriched the customer structure to be more diverse and healthy; on the other hand, it has benefited from the growth in the scale of the industry and has established a second growth curve.
Through early efforts, after a long period of qualified supplier certification and review, Hongxing Auto Leather has entered the supplier system of many well-known domestic automobile OEMs and has accumulated high-quality customer resources. In view of the complex and strict supplier review system of OEMs, spare parts suppliers will not easily change once they enter the vehicle support system and establish cooperative relationships with OEMs.
Hongxing Auto Leather has complete tannery processes and the ability to develop, process, and deliver auxiliary processes such as cutting, etc., and can provide finished products or complete sets of cut pieces according to customer needs. In the future, with the rapid development of China's own automobile brands, Hongxing Auto Leather will also achieve rapid growth in production and sales.
Maintain profit forecasts and maintain “buy” ratings
The company currently has multiple production bases such as Anhai headquarters, Anhai headquarters, Andong factory, wholly-owned subsidiaries Risen Leather and Xingning Leather, holding subsidiaries Hongxing Auto Leather, holding second-tier subsidiaries Baotai Leather, and Lianhua Leather (Indonesia), which have strong production capacity. The company covers the entire tannery process from raw cowhide to wet blue leather to rough leather to finished leather. At the same time, quality management and cost control can be carried out at the source, and the effective connection of front and rear processes can improve operational efficiency.
Hongxing Auto Leather has always focused on improving R&D capabilities, focusing on research and development of technologies such as chromium-free tanned leather and full vegetable tanning. It has accumulated rich R&D experience, and can meet customer needs in a timely and accurate manner with R&D advantages.
We expect the company's return in 23-25 to be 2.01/26/340 million yuan, EPS 0.69/0.92/1.16 yuan/share, respectively, and the corresponding PE is 17/13/10X, respectively.
Risk warning: the risk of environmental protection policies; the risk of product innovation and technological progress; the risk of price fluctuations of major raw materials; exchange rate risks; the risk of reducing the amount of natural leather used in uppers due to changes in fashion trends; the risk of uncertainty about project development, etc.