Key points of investment

Incident: The company plans to jointly invest with Kodali in Hungary to build a structural parts production base in the US, with a total investment of no more than US$49 million. Kodali invests 85%, and Hungary's Kodali invests 15%, achieving an estimated annual output value of US$70 million after delivery.

Localizing the construction of factories in the US has great potential, and leading structural components have benefited. The company invested in the construction of structural parts production capacity of about US$70 million (equivalent to RMB 500 million) in the US. It is expected to be put into operation in 2026-2027. It is basically in line with the pace of downstream customers expanding production in the US. Its battery production capacity plan in the US is about 30 GWH, corresponding to nearly 1.2 billion yuan of structural parts demand. The company's US factory supplies square structural products, and is expected to support production capacity related to Ningde's US technical licensing cooperation in the future.

Considering the low electrification rate in the US and subsequent interest rate cuts to stimulate terminal demand, leading structural components benefit from the core of localization in the US.

The company's profit is steady, and the increase in capacity utilization is hedging the impact of price increases for some raw materials. We expect Q2 revenue to increase 25-30% month-on-month. Increased capacity utilization can hedge the impact of price increases on some raw materials, and overseas factories will reduce losses. We expect the net interest rate to the mother will remain 10% +, and the net interest rate to the mother will remain 10% + for 24 years.

Profit forecast and investment advice: Considering the company's steady profit, we maintain the 2024-2026 net profit estimate of 14.5/18.3/2.24 billion, +20%/26%/23%, corresponding to PE19/15x/12x. The company is the leader in structural components and gave 25xPE in 2024, corresponding to a target price of 134 yuan, maintaining a “buy” rating.

Risk warning: Sales fall short of expectations, and industry competition intensifies.