Incident: New energy vehicle companies such as Ideal, NIO, and Xiaopeng announced their new vehicle deliveries for August 2024 one after another. Many NEV companies continued to increase year-on-year sales in a single month. We believe that the company will continue to benefit from the increase in sales share of domestic NEV companies, and that domestically produced modified plastics will further accelerate, driving the company's performance to continue to grow.

New energy vehicle companies' new vehicle deliveries were disclosed in August 2024, and the company's order volume is expected to continue to increase. According to data disclosed on BYD's official account, passenger car sales in August were 37,854 units, up 35.3% year on year. Overseas markets exported a total of 31,451 vehicles in August, up 25.7% year on year; Chery Holding Group sold 21,1879 cars in August, up 23.7% year on year. Among them, sales of new energy vehicles were 46,526 units, up 158.5% year on year; 97,866 units were exported, up 12.7% year on year. In January-August, the Chery Group sold a total of 1,508,259 vehicles, up 41.9% year on year; Ideal Auto's sales performance in August was still strong, delivering 48,122 new cars, up 37.8% year on year. A total of 288,103 vehicles were delivered from January to August 2024. As of August 31, 2024, Ideal Cars had delivered a total of 921,467 vehicles. In August, NIO delivered 20,176 new cars, surpassing 0.02 million for 4 consecutive months. From January to August of this year, NIO delivered a total of 128,100 new cars, an increase of 35.77% over the previous year. Xiaopeng Motor delivered a total of 14,036 units in August, up 3% year on year and 25.9% month on month. From January to August this year, Xiaopeng Motor delivered a total of 77,209 new cars, an increase of 17% year on year. According to reports, in 48 hours after the launch of the Xiaopeng MONA M03, the cumulative total number of units exceeded 30,000 units, and the cumulative order exceeded 50,000 units. Among the modified plastics used by joint ventures and imported car companies, foreign modified plastic manufacturers usually account for a large share, and domestic manufacturers such as companies account for a relatively small share. Therefore, in the past, compared to the home appliance business, automobiles accounted for a relatively small share. However, with the rapid increase in domestic NEV sales, demand for modified plastics will increase dramatically. In the automotive supply chain, advanced players have high supply chain barriers. As a supplier to domestic car companies, the company will directly benefit from the rise of domestic cars, and import substitution is expected to accelerate further.

The company is a supplier to NEV companies such as Cyrus, BYD, Ideal, and NIO, and has now stably supplied the M5 and M7 models to Wenjie. The company is a leading modified plastic company. Its products have been widely used in automotive parts such as door panels, columns, instrument panels, bumpers, pedals, etc., and has carried out in-depth cooperation with domestic NEV manufacturers and brands, including Cyrus, BYD, NIO, Xiaopeng, Ideal, Nana, Zero Sport, GAC Aian, Geely Krypton, Dongfeng Rantu, etc., and has established cooperative relationships with leading international NEV companies. In the field of fuel vehicles, customers cover well-known automobile manufacturers such as SAIC Volkswagen, FAW-Volkswagen, SAIC-GM, Geely, GAC Toyota, Great Wall, etc., as well as well-known auto parts companies such as Yanfeng, Biou, Xinquan, Chenghang, Huaxiang, Changshu Auto Accessories, Shentong, and Faurecia, and stable batch supply.

As a leading enterprise, the company will benefit from a rapid increase in domestic automobile sales. In recent years, downstream customers' demand for high-end products and large-scale suppliers has continued to increase, and competition for low-end production capacity of modified plastics is fierce.

The large R&D expenses required to upgrade products have further increased the concentration of the modified plastics industry.

At the same time, as the technological gap gradually narrows, domestic enterprises are gradually entering the high-end market, and the local substitution process for high-end modified plastics is also progressing. Among joint ventures and foreign-owned vehicles, leading international modified plastics companies such as BASF, DuPont, and SABIC account for a relatively high share, and the penetration rate of domestic companies is low, but with the rapid increase in domestic NEV sales, the share of domestic manufacturers in the entire supply chain is rapidly increasing.

The recent release of Huawei Quanjie and Zhijie Auto is expected to drive an increase in orders from domestic modified plastics manufacturers. This has created favorable conditions for the company to further expand its business scale and consolidate and strengthen its market position.

Maintain a “Highly Recommended” investment rating. Based on the performance situation in the first half of the year, we expect revenue for 2024-2026 to be 6.017 billion yuan, 6.86 billion yuan, and 7.957 billion yuan, respectively, and net profit to mother of 0.223 billion yuan, 0.298 billion yuan, and 384 million yuan, respectively, and EPS 0.48 yuan, 0.65 yuan and 0.84 yuan, respectively. The current stock price corresponds to PE at 14.4 times, 10.7 times, and 8.3 times, respectively, maintaining a “highly recommended” investment rating.

Risk warning: Crude oil prices rose higher than expected.