occurrences
Tianjin Lizhong Alloy, a wholly-owned subsidiary of the company, recently obtained a project designation from an important strategic customer for integrated die-casting aluminum alloy materials. The project is expected to be implemented on July 1, 2024. The project period is from July 1, 2024 to June 30, 2027. The sales volume during the project period is about 75,000 tons, and the transaction amount is expected to exceed 1.5 billion yuan. There is no objection 1 month before the project expires, and it is automatically postponed for 1 year.
reviews
Orders for heat-free alloys have landed, and the company has excellent performance and is far ahead in the industry. On December 26, 2023, Lizhong Group announced that it has obtained a heat-free alloy material approval certificate from a leading NEV company. The certificate is valid for three years. On December 29, 2023, Lizhong Group announced that it signed a strategic cooperation agreement with Shuai Yichi. After friendly negotiations, the two sides decided to implement a strong alliance with complementary advantages and win-win cooperation development strategies to further expand and strengthen the aluminum alloy casting business. On May 20, 2024, the company announced that it had obtained another qualification certification for heat-free alloy materials from a leading NEV company. Lizhong Group is a pioneer in integrated die-casting alloy materials without heat treatment in China, and has developed and launched a derivative series of heat-treated alloy materials with recycled low carbon and composite properties, which have strong competitiveness in the international market.
The integrated die casting market is growing at an accelerated pace, with heat-free alloys from 1 to 10. Since Tesla first announced the use of integrated die-casting technology for Modely models in 2020, various car companies have followed suit. Among the new forces, Nio, Extreme Krypton, Gaohe, and Xiaopeng have released models using integrated die-casting. Traditional car companies such as Volvo, Volkswagen, and Mercedes-Benz have also accelerated the integrated die-casting industrialization process. Die-casting factory Wencan Co., Ltd. recently received a total of 3 integrated die-casting projects from leading domestic NEV companies. The integrated die-casting penetration rate is expected to rapidly increase. Heat-free alloy materials have many benefits as an inevitable choice for integrated die casting. We estimate that the domestic/global heat-free alloy market will reach 99.1/17.28 billion yuan by 2025. Among domestic companies, companies have three advantages in technology, customers, and production capacity, and their market share will steadily increase.
The wheel business has received another historic order, and profitability is expected to increase again. The company's subsidiaries, Tianjin Lizhong and Lizhong Me****cently received fixed notices for aluminum alloy wheel projects from an internationally renowned luxury car company (customer 1) and an internationally renowned car company (customer 2), respectively. The estimated sales amount for the customer 1 project is about 8.199 billion yuan; the estimated sales amount for the customer 2 project is about 956 million yuan during the period. This time, the company received an order of about 9.155 billion yuan, which is the largest order in history. The average annual sales amount is 1.07 billion yuan, which is also the highest in history. Winning a large order this time shows, on the one hand, that the company is leading the world in the development, design, technical quality, and production guarantee capabilities of high-end aluminum alloy wheel products. On the other hand, the overseas profitability of the company's wheel business is higher than at home, and the company's profitability is expected to increase again.
Profit forecasting
The company's net profit for 2024-2026 is estimated to be 1,086/1,391 billion yuan, EPS is 1.69/1.87/2.20 yuan, respectively, and the corresponding PE is 11.41/10.26/8.74 times, respectively. Maintain a “buy” rating.
Risk warning:
Risk of aluminum price fluctuations; risk of project progress falling short of expectations; risk of downstream demand falling short of expectations; risk of policy exceeding expectations, etc.