According to the Zhitong Finance APP, Swhy released a research report stating it has initiated coverage of Minth Group (00425), giving it a "buy" rating, and projects the company's main revenue for 2024-2026 to be 23.81 billion / 28.25 billion / 34.32 billion, plus other revenue, totaling 23.91 billion / 28.35 billion / 34.42 billion, with year-on-year growth rates of 16.0% / 18.6% / 21.5%; gross margin for 2024-2026 is expected to be 27.4% / 27.4% / 27.1%; and net income attributable to the parent is projected to be 2.25 billion / 2.68 billion / 3.17 billion yuan, with year-on-year growth rates of 18.3% / 18.9% / 18.3%.

Shenwan Hongyuan's main points are as follows:

The minth group is one of the top 100 global companies in the components sector and a hidden champion in global automotive exterior small parts.

The group's predecessor was Ningbo Minfu Machinery Co., Ltd., established in 1992, with a history of thirty years. After its establishment, the company's business developed rapidly, and in 1997, it consolidated various subsidiaries to form Minth Group, which was listed on the Hong Kong Stock Exchange on December 1, 2005 (0425.HK). As an outstanding parts enterprise, the company's main business revenue CAGR has been 19.7% since 2006, and the net income attributable to the parent has had a CAGR of 12.2%. In nearly 20 years, maintaining such high growth rates is indeed rare for a quality company; in 2023, it achieved revenue of 20.52 billion yuan and a net income of 1.9 billion yuan.

The company is a rare global symbol.

The minth group's experience in globalization is extremely rich, with a history of 17 years of going global. Since 2007, the company has accumulated rich experience in overseas factory establishment and operation during its globalization process, forming a relatively complete system from acquisitions to joint ventures and self-construction in global resource integration. If this bank analyzes the overseas market as a whole, the company’s revenue grew from 0.124 billion in 2006 to 9.97 billion in 2023, resulting in a CAGR of 29.4% over the 17 years, and by the first half of 2024, overseas revenue accounted for over 50%, indicating that rapid growth overseas suggests a relatively smooth globalization path. The layout of global factories is expected to become the company's 'core competitiveness' amid ongoing de-globalization and escalating tariff challenges.

Why pay attention to minth group at this stage?

1. The company's growth logic is significant, with the battery box business recently leading to performance realization, while the asia vets exterior business is expected to be a growth point for the next phase. As of the first half of 2024, the company has 125.08 billion yuan in battery shell orders on hand. Assuming the order release life cycle is 8-10 years, the annual sales could reach 12.51-15.635 billion yuan, which will greatly contribute to the company's annual revenue. The battery shell business belongs to heavy asset investment, and the minth group has already achieved globalization investment and profitability, combined with a sufficiently rich customer structure and solid market positioning, is expected to continuously increase market share.

2. The company's current profitability and financial indicators have improved. With the slowdown in heavy asset investments, the company is expected to see a recovery in financial indicators and an increase in valuation. First, due to substantial investments in the battery shell business after 2020 and the company's commitment to high dividends, free cash flow has turned positive in 2023; secondly, the company's battery shell business capacity is ramping up, gross margin is further increasing, which boosts the overall gross margin, net margin, and roe of the company; finally, the company will start share buybacks in the second half of 2024 and has clarified future dividend expectations, and the pb valuation is also at a historical low, indicating that as a globally growing minth group, the valuation is expected to recover with continuous improvement in financial data.

Risk warning: Lower-than-expected downstream sales, international trade environment risks, and slower-than-expected development of new businesses.