Matters:
The company announced that its subsidiary Anhui Zhongding Shock Absorbing Rubber Technology Co., Ltd. recently received a customer notice that the company has become a batch supplier of air suspension system assembly products for a new platform project of a domestic new energy brand OEM.
The life cycle of this project is 6 years, and the total life cycle amount is approximately 1,418 billion yuan.
Ping An's point of view:
The company received an order for air spring products for the first time, which has the significance of breaking the ice. The company has been accelerating the improvement of the supply chain system that optimizes the performance and cost of air suspension systems in the Chinese passenger car market.
As a leader in non-tire rubber parts in China, Zhongding Co., Ltd. has deep accumulation in formulations, R&D and manufacturing in the rubber field. Therefore, Shanghai Dingyu Intelligent Technology Co., Ltd. has an innate advantage in focusing on air spring R&D and manufacturing business. The breakthrough in Shanghai Dingyu air suspension system product orders is a landmark, laying the foundation for Zhongding Co., Ltd. to further expand the air suspension system assembly product market in the future. At the same time, the company is also accelerating the landing speed of other hardware assembly products for air suspension systems.
The components of passenger car electronically controlled air suspensions with high barriers and high value are air supply units and air springs.
Among them, domestic air spring components are the first. Currently, the main local suppliers are Kong Hui Technology and Baolong Technology. Prior to Zhongding's current appointment, Zhongding AMK China was a local air supply unit supplier and is currently gradually increasing the hardware localization rate. According to Shenzhen Stock Exchange Interactive Easy (March 22, 2024), AMK China has received orders with a total output value of about 10.4 billion yuan. This targeted order includes the two core components of the air suspension - the air supply unit+air spring. It is estimated that the bicycle support amount is high.
Benchmark model demonstration effect+large-scale cost reduction Two-wheel drive air suspensions are becoming large-scale, and local core component suppliers have entered the scale effect stage. According to the Geshe Automobile Research Institute, the sales volume of new cars with standard air suspensions in China in 2023 was about 564,000 units (+137%), with a penetration rate of 2.7% (1.2% penetration rate in 2022). Currently, air suspensions have penetrated less than 300,000 models. Benchmark car companies such as the Xiaomi SU7 and Huawei Smart Choice cars such as the Genjie M9 and the Zhijie S7 have strong demonstration effects. Driven by benchmark car companies, the air suspension loading rate is expected to increase rapidly.
Profit forecast and investment suggestions: Zhongding Co., Ltd.'s traditional main business is strong in profitability of non-tire rubber parts, and incremental businesses such as air suspension systems are developing well. The air suspension sector has high entry barriers, and as the localization of air suspension progresses further, the profitability of this business will increase. We maintain the company's performance forecast. We expect net profit to be 11.3/13.9/1.65 billion in 2023/2024/2025. Currently, the company's overseas business profit continues to recover, the overall business situation is improving steadily, and the valuation is low. We maintain the “recommended” rating for the company.
Risk warning: 1) The degree of overseas business recovery falls short of expectations; 2) the new business faces fierce competition, resulting in lower profitability than expected; 3) the output of major supporting customers falls short of expectations; 4) the penetration rate of air suspension systems falls short of expectations.