Global leader in cell structural components, leading market share & profit margin. The company has formed stable supply relationships with leading global battery companies such as Ningde Times, China Airlines, Everweft Lithium Energy, and LG. We estimate that in '23, the company's global market share was 32%, the gross profit margin for structural components was 24%, leading the market share and gross margin for many years. There is a significant gap with other companies, and the leading position is stable.

The customer-technology-scale cycle continues to consolidate advantages. 1) Customer stickiness: The industry has high customer stickiness, and the company has an optimal customer structure and leading supply share; 2) Technical advantages: The company has cooperated with Asahi Seiki Japan for a long time to accumulate molds and equipment to maintain leadership in product development, yield, consistency, etc.; 3) Scale effect: The company uses excellent automation & production line replication capabilities to dilute costs through scale effects to consolidate cost advantages. The company forms a positive customer-technology-scale cycle to consolidate competitive advantages.

The operating rate is expected to pick up, and the company's core benefits. In terms of demand, the battery structural parts industry space is expected to be nearly 57 billion yuan in '26, with CAGR = 22% in three years, maintaining a high growth rate; in terms of production schedule, domestic power+other battery production was +39.8%/+60.0% YoY, +73.9%/+3.2% month-on-month, and production schedules in the battery and midstream materials sector have all been significantly repaired since March; in terms of operating rate, structural component companies' capacity expansion has slowed drastically. The industry & company's operating rate is expected to rise in 24-year, and the industry & company's operating rate is expected to rise in 24-year. In the context, it is conducive to strengthening the company's Profitability.

Overseas travel & new technology open up new momentum for growth. 1) Going overseas: Overseas focus is on localized battery supply, and the local competition pattern is better. The company has built factories for leading Chinese, Korean, and European customers in Europe, and has already set up a base in the US; 2) Big cylinder: Tesla promoted mass production of 4680 batteries, 46 battery steel shell stretching process is more difficult, and the company has mass production capacity, taking the lead in customization; 3) Harmonic speed reducers: Joint ventures with Mengli and Mengying entered the robotics field.

Refinancing: The fixed increase issue price in 20/23 was 60.47/104.85 yuan, raised 1,386/3.51 billion yuan, and convertible bonds raised 1,534 billion yuan in '22, and the share conversion price was recently lowered to $150.7 in May '24.

Profit forecasts, valuations, and ratings

The company is a global leader in cell structural components. It continues to consolidate its competitive advantage, benefit from the upward cycle of operating rates, and explore overseas markets and new technologies. We forecast the company's net profit of 14.2/16.6/1.90 billion yuan for 24-26, corresponding PE of 18/15/13X. Referring to comparable companies, based on the company's stable market share and profitability, the company was given 25 times PE in 24 years, with a target price of 131.9 yuan/share, covered for the first time, and given a “buy” rating.

Risk warning

Demand for trams and energy storage fell short of expectations; utilization rates fell short of expectations; raw material prices rose rapidly; profits from overseas bases fell short of expectations; industry price cuts exceeded expectations; and major shareholders reduced their holdings.