Xinquan Co., Ltd. is a leading domestic private car interior decoration company. The company has a relatively complete automotive interior and exterior parts assembly product line, and has achieved product coverage in all application fields of commercial vehicles and passenger vehicles, including core high-quality customers such as Tesla, Ideal, Chery, and Geely. The category and regional expansion continues to deepen. As a leading private enterprise, the company has core advantages in management ability and process innovation. The average gross profit margin and net profit margin of the industry in the third quarter of 2024 were 17.75%/7.57%, respectively. Among them, the gross profit margin and net interest rate of Xinquan Co., Ltd. were 20.47% and 7.11% respectively, and it has a strong dominant position in the industry.

Growth cycle review: Based on core customers, the third round of the globalization strategy is progressing rapidly. Xinquan has experienced a growth cycle and relies on high-quality customers to drive order volume. 1) A period of rise of independent brands: In 2015, the company mainly drove the company's first round of growth through independent brands such as Geely and SAIC Motor. Revenue increased from 0.9 billion yuan in 2015 to 3.1 billion yuan in 2017, and successfully operated and listed. 2) Energy adjustment period: Entering a period of stabilization in 2018, the company made efforts to adjust the customer structure and actively layout technology research and development. The revenue reached 3.5 billion, preparing changes during the period of calm. 3) Tesla's second upward period: Starting in 2021, with the gradual expansion of Tesla's major customers, driving the company's first round of growth cycle growth, revenue successfully broke the 10 billion mark in 2023, making a significant leap forward. 4) The third growth period of globalization: Based on Tesla's global footprint, we will expand overseas markets and reach a revenue target of 20 billion. The company has invested in the construction of factories in Slovakia, Mexico, Malaysia and the United States, covering Europe, America and Asia. The global production capacity layout is gradually improving, and the second growth has created a leading global interior and exterior enterprise.

Large interiors and exteriors are a trillion-dollar circuit for domestic replacement in the era of electric intelligence globalization. Xinquan's interior+exterior+seat business went hand in hand. We estimate that the market size will be 1.01 trillion yuan in 2023, and it is expected to reach 1.3 trillion in 2030. In the era of electric intelligence, large interiors and exteriors are the most important core tracks after batteries and intelligence. In total, ASP is expected to reach 0.01-0.02 million yuan. The nearby layout and localization require domestic alternatives to be the strongest, and it is expected that 100 billion leaders will be born. With the accumulation of traditional interiors, Xinquan is actively developing product sectors such as exterior and passenger car seats, and is expected to become the next key growth direction. Before 2023, the company's ASP category was 4000 to 5,000 yuan. Relying on the exterior layout, the total ASP was raised to 6000 to 8000 yuan in 2023; it is expected that in the next 1-2 years, the seat project is expected to raise the ASP limit to 0.01-0.016 million yuan, and the path of category expansion will continue to deepen.

The three dimensions of category+customer+region resonate, and Xinquan ushered in the next round of global growth. 1) Categories:

Starting with the interior parts business, the categories gradually expanded to the exterior parts and seat business, and the value of bicycles doubled, from 4,000 to 5,000 yuan to 0.01-0.016 million yuan, and the ASP ceiling was higher. 2) Customers: The company relies on the development of Tesla's core major customers, while other overseas customers are actively working hard to find fulcrums for major European and American customers to grow. Currently, the company has invested in the construction of factories in Slovakia, Mexico, and Malaysia, covering Europe, America, and Asia. In addition to supporting Tesla, it is expected to strengthen overseas OEM manufacturers in the future, radiating traditional European giants. 3) Geography: The company has invested in the establishment of companies and production bases in Malaysia, Mexico, Slovakia and the United States to reach global customers. As production capacity gradually climbed, Mexico's Xinquan has now begun to contribute to revenue and profits. The European plant in Slovakia is currently under construction and is expected to be put into operation this year, mainly to support European Tesla; it is expected to support other European automakers in the future to further expand overseas market space.

Profit forecast: In 2024-2026, the company is expected to achieve revenue of 13.502, 17.273, and 21.074 billion yuan, an increase of 27.71%, 27.93%, and 22.00% year-on-year; the net profit due to 2024-2026 is 1.061, 1.42, and 1.708 billion yuan, corresponding PE is 22, 16, and 14 times, respectively, giving a “recommended” rating.

Risk warning: Risk of slowing downstream customer growth, risk of changes in import and export trade policies, risk of increased global competition, risk of rising raw material costs, etc.