Longsheng Technology has been engaged in R&D, production and sales of EGR systems for a long time. In 2023, it will open new space for the T4 stage of non-road construction machinery, the passenger car hybrid EGR market, and the natural gas heavy truck jet rail assembly market. The business expanded to R&D and manufacturing of NEV motor cores, NEV precision parts, and aerospace products. Benefiting from the rapid growth of new energy vehicles, the company's iron core business has grown rapidly, and has now become the company's largest business segment.
Domestic EGR faucets benefit from PHEV emissions
The key to achieving fuel savings in hybrid vehicles is that hybrid system engines use a high compression ratio technical path, but higher compression ratios cause problems such as high detonation tendencies and limited improvement in fuel consumption. The introduction of EGR in hybrid system engines can absorb part of the heat dissipation, reduce pump gas loss, maximum combustion pressure and temperature peaks in the load area, effectively suppress explosion tendency problems caused by high compression ratios, and improve engine fuel consumption. Currently, mainstream car companies are using EGR technology to improve fuel consumption and explosion resistance of PHEV models.
Since its establishment in 2004, the company has focused on expanding the EGR business and improving technology. It has taken the lead in formulating EGR related industry standards. It is a leading domestic enterprise in the field of commercial vehicles, especially light commercial vehicles.
With the rapid development of passenger car plug-in hybrid technology and range extension technology, the company EGR also welcomed new volume and continued to increase its market share. Currently, the new energy vehicle companies supporting the company's EGR products include BYD, Geely, Chery, SAIC, Dongan Power, and Zhixin Technology. The company's EGR system module products have fully covered BYD's fourth-generation DMI hybrid engines. At the same time, the company has completed supporting the development of BYD's 5th generation DMI engine EGR system products.
Iron core customers are of high quality, and demand is increasing
The company's top two motor core customers, Tesla and United Electronics, ranked second and third in the installed capacity of domestic drive motor suppliers in 2023; at the same time, in 2023, the company successfully developed a series of direct supply customers such as Freddy Power, Star Drive, Jinkang Power, and Bosch to indirectly supply BYD, Geely, NIO, SAIC, Chery, Ideal, Changan, Cyrus, Xiaomi, and Japanese car brands. The company's motor core equipment includes Model 3, Model Y, Changan Deep Blue, Avita, Geely Galaxy, Emgrand, Lynk & Co 06/07/08, Genie M7/M9, BYD Equation Leopard, Ideal MEGA, NIO ET5, Xiaomi SU7, SAIC Zhizhi, Roewe, and Chery Intelligence.
At present, the company's motor core business is developing well, and there is a steady supply and growth of existing customer projects. In the fourth quarter of last year, the iron core project of a leading domestic force was mass-produced, and the number of explosive models could increase rapidly. It is expected that it will continue to grow rapidly in the second quarter, ensuring the company's rapid development. The first phase of equipment for the new plant project of Wuxi Longsheng New Energy Technology Co., Ltd., which the company invested in, has been completed. In order to better meet customer needs, the company's 7 new stamping production lines will gradually be put in place in 2024, which can meet more customer order needs. In addition to motor core products, the company has developed copper bars, Busbars, balance plates, ECU stamping parts and other related products for customers in the NEV sector, and plans to provide more solutions for electric drive customers. More products will be applied to NEV motor drive systems in the future.
High quality and steady development of precision parts customers
The products are mainly supplied to leading Tier 1 companies at home and abroad and leading domestic new energy companies, such as European and American joint venture customers (Bosch, United Auto Electronics, Brose, Mahler, Mubel, etc.), Japanese customers (Donghai Chemical, Hitachi, Talki, Lichang, Alps, etc.), domestic customers (Yanfeng Kaibo, Junsheng Electronics, NIO, Jinkang Power, Tudatong, CRRC, etc.); Among them, the company's products also directly support the transformation of two leading domestic mobile phones into the automotive sector, and will continue to develop steadily.
The aerospace business outlines a third growth curve
The company's holding subsidiary Weiyuan Zhongjia has the ability to design/process/manufacture aerospace products, military products, precision molds, tooling, automation equipment and provide customers with complete system integration solutions, providing products and services for domestic aerospace, satellite, space station and other businesses, including but not limited to large military drone structural parts, small military drone structural parts, satellite solar wing hinges, satellite solar wing compression release mechanisms, satellite solar wing drive mechanisms, satellite solar wing drive mechanisms, satellite attitude control mechanisms, air molecular pumps and blades. In the first quarter of 2024, Microresearch and Zhongjia signed a three-year “Strategic Cooperation Agreement” with the domestic commercial space unicorn Galaxy Aerospace to carry out in-depth cooperation on precision processing, production and assembly of core components of satellite energy modules, communication modules, and control modules.
Investment advice: The company's EGR benefits from PHEV emissions. The iron core business customers are of high quality, production capacity is rapidly increasing, and it is actively deploying new businesses such as aerospace. We expect that in 2024, 2025, and 2026, the company will make profits of 229, 3.05, and 370 million yuan respectively, corresponding to 18.3, 13.8, and 11.3 X PE, respectively, and maintain a “highly recommended” investment rating.
Risk warning: 1. Downstream demand falls short of expectations; 2. New business development falls short of expectations.