Key investment points: On July 29, 2024, the company issued the “Notice on Issuance of Convertible Corporate Bonds to Unspecified Targets”. The total amount of capital to be raised will not exceed 0.41 billion yuan to build production capacity for airbags and steering wheels.

The fund-raising project expands the production capacity layout and lays the foundation for performance growth. The fund-raising project will add 1.3 million sets of steering wheel assemblies and 4 million sets of airbag assemblies. The construction period will be 24 months, and the total production capacity will reach 3.3 million units/5.5 million sets after completion. Currently, the industry is in a critical phase of domestic production replacement. The company developed the airbag and steering wheel business in 2021, and the domestic market share in 2022 was 1.16%/1.49% respectively, with potential for growth. The new production capacity will help the company further improve the safety system product structure, form an industrial layout, and accelerate market share acquisition. Since 22 years, the company's on-hand orders have been growing rapidly. As of June 2023, the company's airbag and steering wheel products have been ordered with a fixed intention to sell 3.69 million/0.83 million sets per year. The company is expected to break through production capacity bottlenecks through this fund-raising project and lay the foundation for continued growth in performance.

With the acquisition of global platform projects from major overseas customers, globalization is expected to begin. On July 26, 2024, the company announced that it was designated by S customers from well-known European automakers, including front and rear seat belts for a F platform project (1.58 million units, 0.729 billion yuan), front and rear seat belts for an S platform project (5.95 million units, 3.627 billion yuan), and an S platform project airbag (5.95 million units, 0.9 billion yuan), for a total amount of 5.256 billion yuan, with a life cycle of 8 years The average annual revenue is 0.657 billion yuan. The S customer is the fourth largest automaker in global sales in 2023. The company first received S customer designation in April of the same year. The target amount has increased dramatically this time, which also shows that the company stood out in the process of adjusting the international global automotive supply chain pattern.

We have been deeply involved in our main business for more than 20 years, and achieved high growth through brand awareness after listing. As a private enterprise, Songwon has strong profitability on high-barrier racetracks, and the gross margin of seatbelts can reach more than 30%. By cultivating independent research and development capabilities, it has experienced a development path from buses to commercial vehicles to low-end passenger cars, middle and high-end passenger cars, and further built brand awareness through listing, the compound revenue growth rate in 2020-2023 reached 34%, which is significantly higher than before launch. At the same time, it received further orders from major international customers in 2024, laying a solid foundation for continued growth after 2025. After years of intensive cultivation of passive safety websites, the company has already entered a harvest period, accelerating the pace of domestic substitution and overseas travel through cost and service advantages.

Investment analysis opinion: In view of the company's customer optimization and the acceleration of the pace of sales of autonomous car companies in 2024, increase the 2024-2026 revenue forecast to 1.79/2.31/3.41 billion (original forecast 1.734/2.245/3.2 billion); increase 24-26 net profit to mother by 0.3/0.39/0.51 billion yuan (original forecast 0.288/0.384/0.482 billion yuan); 24-26 The year-on-year profit growth rate was 51.8%/28.9%/32.3%, corresponding to the current PE of 21x/16x/12x. Given the company's scarcity in the field of passive safety, the industry has high barriers and maintains a buying rating.

Core risks: Downstream automobile sales fall short of expectations, customer development falls short of expectations, and raw materials rise; the company received a regulatory letter from the Shenzhen Stock Exchange on 3/15. Investors' calls went unanswered several times, and investor relations were not managed in a timely manner. Please pay attention to the above risks.