Mica materials are thermal loss control safety devices with high customization properties, similar to Tier 1 components. Driven by technological process innovation, the company has been recognized by many automobile manufacturers. The company's growth points are:

1) Product category expansion and ASP improvement; 2) Accelerated overseas travel to obtain targets from leading overseas car companies; 3) Development of new non-mica materials second growth curve.

The mica business is the cornerstone, and overseas revenue is growing at an accelerated pace

The role of high temperature resistant mica board is mainly insulation and high temperature resistance. Thermal uncontrolled insulators are used in many areas of new energy vehicles, and the company's mica ASP is expected to continue to improve. The company's products are used in cells/modules and battery covers, high and low voltage harnesses/wire rows, autonomous driving module areas, modules to modules, etc., and it is expected that the categories will continue to expand among customers.

2024H1 has overseas revenue of 0.24 billion yuan, YOY +65%, accounting for 49% of revenue, and a gross profit margin of 39.9%, which is 12.3 pcts higher than domestic business revenue, and the profitability of overseas business is higher than that of domestic business. In terms of customers, the company is a first-class supplier to well-known domestic and foreign automobile manufacturers such as Tesla, Volkswagen, BMW, Mercedes-Benz, and Volvo.

The company has plenty of orders in hand, and the announced order is close to 10 billion dollars. The company has been designated by many overseas car companies and has set up factories in Thailand and Mexico to speed up the process of going overseas.

Strong innovation ability to expand new categories other than mica

The company created an original integrated molding process for gluing, which realized the three-dimensional shape preparation of mica products, improved the mechanical strength and other properties of the products, and broke through the limitations of the shape of mica insulation products. The company continues to accumulate production experience, continue to innovate processes, and continue to develop and apply new technologies and processes to continuously improve product quality and performance.

In terms of non-mica materials, the company's products have expanded from thermal loss control protective insulators for new energy vehicles to non-mica products such as new lightweight safety structural parts, which is expected to open up new growth points. The company announced in March 2024 that it received a fixed notice from a North American NEV customer to select the company as its supplier of new lightweight safety structural components for NEVs.

Profit forecasting and valuation

The estimated 2024-2026 revenue is 1.18, 1.53, and 1.99 billion yuan, up 47%, 30% year on year; net profit to mother is 0.24, 0.34, and 0.45 billion yuan, up 40%, and 35% year on year. Compared with similar companies, Ping An Electric, China Fused Electric, and Farah Electronics 2025 PE was 18, 25, and 22x, respectively. Considering the company's growth and the valuation level of companies of the same type, PE 30x in 2025 was given, corresponding to a stock price of 27.8 yuan/share, covered for the first time, and given a “buy” rating.

Risk warning: NEV sales fall short of expectations, new product development falls short of expectations, trade frictions, sharp increases in raw material prices, increased competition, etc.