It covered Minshi Group for the first time and gave it a “buy” rating. The target price for Hong Kong stocks was HK$29.48, and the target price for US stocks was $75.36. The company is deeply involved in the field of automotive exterior and structural parts. The revenue CAGR for 2006 to 2023 was 21%. The forward-looking layout of new businesses such as battery boxes is accelerating its expansion worldwide. At present, the company has grown into one of the world's largest suppliers of battery boxes and body structural components, with outstanding advantages in technology, global operation, and overseas profitability. With the construction of battery box production capacity and the improvement of the international layout, the peak of the company's capital expenditure has passed, and the performance of global operations has been realized, and the valuation is expected to recover from a low level.

The traditional business is growing steadily, and new markets and new customers are opening up growth space. The company started with traditional material exteriors and structural parts and carried out lightweight transformation, then closely followed the trend of electrification and intelligence of automobiles, forwardly laid out products such as battery boxes, etc., while intelligently upgrading exterior and structural parts and arranging chassis structural parts in line with the trend. The supporting value of bicycles continued to increase. As of 24H1, the battery box business has more than 125 billion on-hand orders, and the revenue growth rate is expected to be 30%-40% in 24-26. Other traditional exterior and structural parts businesses are also expected to grow at 5%-15%. The company began overseas expansion in 2007, with 24H1 accounting for 59.2% of overseas revenue. Currently, the company has more than 70 factories around the world, supplying 70+ automobile brands. All business lines have accumulated a large number of high-quality customers, and the growth ceiling is high.

Both internal and external repairs maintain high profitability. The peak of capital expenditure has passed, and the company's gross margin has remained high for a long time. The gross margin for 23 years was about 9 pct higher than that of its peers. The company continues to maintain high R&D investment to ensure technology, product and process advantages; reduces costs and responds quickly by extending the industrial chain and adopting a central factory+satellite factory model; the company cooperates with many middle and high-end car companies, and the gross margin of the project is relatively high. Due to the battery box business and overseas factory layout, capital expenditure has continued to be high in the past few years. Currently, the company is gradually moving from an expansion period to a harvest period. As the volume and capacity utilization rate of battery boxes increases in the global market, it is expected that the gross margin of battery cases will increase year by year, which will also lead to a decrease in the overall cost rate during the period.

How we differ from the market view

The market is concerned that the slowdown in the growth rate of new energy vehicles in Europe will affect the company's revenue growth. We believe that Europe's medium- to long-term energy trends are clear, and at least 7 affordable electric models will be launched in 25 years, catalyzing an increase in the penetration rate of new energy sources. The company's battery box business has an early layout and sufficient orders in hand. In the European market, the company has full technical reserves and a price advantage. Currently, European car companies urgently need to reduce costs to improve product competitiveness, and the company's competitive advantage is outstanding.

Profit forecasting and valuation

The company's revenue for 24-26 is expected to be 23.8/27.8/32 billion yuan, with net profit of 2.342/2.847/3.425 billion yuan, or +23.1%/+21.6%/+20.3% year-on-year. As of November 11, the company's PE-TTM was only 7.60 times lower than the historical 25% fraction. Referring to the consistent PE valuation of comparable companies, the company was given 11.1 times PE in 25 years, with a target price of HK$29.48; considering 1 ADR = 20 Hong Kong shares, the US/Hong Kong stock price ratio in the past year was about 99.71%, corresponding to the target price of US stocks of 75.36 US dollars. The first coverage gives a “buy” rating.

Risk warning: Global automobile market sales fall short of expectations; prices of raw materials and freight fluctuate.