Matters:
Company announcement: On July 3, 2024, the company disclosed Guojin Securities's “Response to the Inquiry Letter on the Review of the Application Documents for Issuance of Shares to Specific Targets” of Guojin Securities. The company plans to raise no more than 1.3 billion yuan of capital for the construction of new production capacity. It plans to target no more than 35 specific investors, including the related party CRRC Financial Holdings. Among them, CRRC Financial Holdings plans to subscribe for the shares issued in this issue according to 50.87% of the financing scale, that is, no more than 0.661 billion yuan in cash.
Guoxin Telecom's New Views:
1) The company is a leading shock absorber company for rail transit and major construction projects under CRRC Group, and has a stable market position. In the future, through new production capacity and overseas market expansion, we will actively seek new overseas orders and maintenance market share. Profitability is stable, and the basic performance market is stable.
2) The company is the second-largest producer of wind power blades in China. Currently, the third-party market pattern for wind power blades is concentrated. At the same time, with the large-scale development of blades, downstream fan companies are also gradually switching to external procurement of high-value large blades. Overseas fan companies are also seeking high-quality domestic suppliers to jointly explore overseas markets.
3) The company's automotive business segment relies on the long-term brand advantages of German subsidiaries and close cooperation with German car company customers to continuously optimize the global production capacity layout and promote cost reduction and efficiency. In the future, costs will be optimized by transferring the supply chain to the Asian region. Coupled with seizing the market opportunities of the rise of domestic new energy vehicles, it is expected that profit breakthroughs will be achieved while maintaining the scale of revenue.
Investment advice: The company is expected to achieve operating income of 19.3/20.9/22.6 billion yuan in 2024-2026, an increase of 10%/8%/8%; net profit to mother of 0.57/0.67/0.77 billion yuan, an increase of 47%/18%/14% year over year. The current stock price is 14/12/10 times PE, respectively. Taking into account FCFF's valuation and relative valuation, we believe that the reasonable valuation range for the company's stock price is 11.3-12.4 yuan, corresponding to the 2024 dynamic PE range of 16.4-17.9 times, which has a 19%-31% premium over the company's current stock price. The first coverage gave it an “superior to the market” rating.
Risk warning: Overseas demand falls short of expectations; corporate refinancing may dilute immediate earnings and increase industry competition; international trade protection intensifies; raw material prices rise.