Fengmao Co., Ltd.: a “little giant” specialized in rubber parts
Fengmao Co., Ltd. is a national-level specialized, special and focused “little giant” enterprise specializing in the development and industrialization of precision rubber parts. Its main products include transmission system components, fluid pipeline system components and sealing system components. Transmission system components are the company's main products.
Mainly engaged in transmission system components, “import substitution, overseas competition” two-wheel drive. By the end of '23, the company's automobile sector business revenue accounted for more than 90% of the company's revenue. The products were mainly aimed at the vehicle support market and after-sales service market. The front-end market focuses on the fuel vehicle market, which has a large market capacity, and also has a layout in the direction of new energy vehicles. There is continuous market demand in the aftermarket as vehicle age and mileage increase.
Against the backdrop of the Russian-Ukrainian war, the withdrawal of foreign capital, and the contraction of the main rivals Gates and Condy's business, the company ushered in a period of development opportunities. Demand for orders from customers such as LN and FWH VOSTOK continued to grow, and overseas business expansion with high gross margins further increased the company's profitability.
The company has obtained exclusive brand licenses within Michelin and global brand licenses other than North America, using Michelin brand recognition to drive the expansion of the transmission business.
The downstream application space is broad, and there is sufficient room for growth in non-vehicle business reserves. The company's non-vehicle business covers fields such as construction machinery, household appliances and sanitary ware, and non-road vehicles, and its share of revenue has continued to increase in recent years. The development of industrial machinery projects has been strengthened, and with the gradual release of output value during the life cycle of the project, we expect the non-vehicle business to gradually expand.
The “air spring” is poised to start a second growth curve
The company promptly follows the changing trends in the automotive industry and actively lays out the NEV sector. At the same time, technicians related to air springs were introduced, and air springs are in the trial production stage. With the further development of the air suspension market, it is expected to start a second growth curve.
Profit Forecasts and Investment Ratings
The company's overall revenue for 2024-2026 is expected to reach 1,052/13.44/1,674 million yuan, and the net profit corresponding to 2024-2026 is expected to reach 1.85/2.38/292 million yuan. Currently, PE19/15/12X.
Referring to the company's 25-year average PE level, the company was given a 25-year 19X PE with a target price of 56.43 yuan.
As a leading enterprise in the domestic rubber conveyor belt field, the company's main business is expanding domestic and foreign markets one after another through domestic substitutions, Michelin licensing, etc., and the diversified layout of industrial transmission belts, air springs, etc. has opened a second growth curve, and its performance is expected to grow rapidly in the future.
Risk warning: Risk of decline in the automobile industry due to the macroeconomic downturn, risks brought about by the development of new energy vehicle technology, sales risks in overseas markets, risks of price fluctuations in major raw materials, subjective risks, market development and management risks, and accounts receivable recovery risks.