Autonomous and passive safety leader, domestic replacement growth can be expected
Since its establishment, the company has been engaged in the automotive passive safety business, and has been deeply involved in automotive safety and passive systems for more than 20 years. Its main products include seat belt assemblies and components, special seat safety devices, etc. With the further improvement of the product matrix, the company expanded its business to steering wheel and airbag products.
The company is a first-level supplier of automotive passive safety systems. In 2023Q1, Geely/Cherry/Great Walling/SAIC-GM-Wuling/FAW accounted for 25.61%/14.26%/9.94%/8.64%/4.11% of the company's revenue. In April and July 2024, the company successively disclosed that it had obtained targeted notices from well-known European car manufacturers to provide vehicle seat belts and airbag products for customer platform models, and the globalization process accelerated.
The company's revenue continued to grow steadily, from 0.426 billion yuan in 2017 to 1.28 billion yuan in 2023, with a 6-year compound growth rate of 20%. The continuous growth of the company's revenue in recent years is mainly due to the company's continuous expansion of new customers, increasing the supporting ratio of existing customers, and expanding new products.
In 2023, the company achieved net profit of 0.198 billion yuan, a year-on-year increase of 68%, and the “airbag+steering wheel” business growth accelerated.
Safety products and independent customers continue to sell. The accelerated growth of “airbag+steering wheel” benefits from the continuous optimization of the sales structure of seat belt assembly products, and the company's ASP for seat belt assembly products continues to grow. Seat belt assemblies and components ASP grew steadily from 38.61 yuan in 2017 to 55.41 yuan.
The company is actively expanding production capacity and improving supply capacity. The company plans to issue convertible bonds to raise no more than $0.41 billion. After delivery, the project is expected to add 1.3 million sets of steering wheel assemblies and 4 million sets of airbag assemblies. The construction site of this project is located in Chaohu City, Anhui Province. The company's existing customers, such as Chery, JAC, Geely, Changan, SAIC, and potential customers such as NIO, Volkswagen (Anhui), and BYD, are all located in and around Anhui Province. Combined with the agglomeration advantages of the automobile industry in Hefei, the project will be able to form industrial chain synergy benefits of rapid response and rapid delivery after completion, reducing logistics costs and supply chain risks.
The expansion of airbag+steering wheel products has further increased the value level of the company's bicycle equipment. In 2023, the unit price of the company's airbag products reached 157.85 yuan, while the unit price of steering wheel products was 151.64 yuan, which is more than double the unit price of the company's seat belt products in 2023. Safety products and independent customers continue to release, and “airbag+steering wheel” is growing faster.
Investment advice: We expect the company's net profit to be 0.286/0.352/0.47 billion yuan in 24-26, corresponding to PE of 23/19/14 times. The growth of the company's safety products and independent customers will accelerate the growth of “airbag+steering wheel”. The 24-year PE valuation will be 25-30x, corresponding to the target price of 31.75-38.1 yuan, for the first time coverage, giving a “buy” rating.
Risk warning: NEV sales fall short of expectations, risk of increased industry competition, risk of rising raw materials, financial risk, etc.