Core ideas:

1) Hengshuai Co., Ltd.: Micromotor leader, pioneering the second ADAS curve. In 2001, Hengshuai Micromotor was established. The company is mainly engaged in R&D, production and sales of automotive motor technology and fluid technology-related products, and is committed to becoming the world's leading supplier of automotive motor technology solutions.

2) Micromotors: Vehicle market consumption upgrades, fully benefiting the micromotor market. The number of micro motors used in automobiles is directly proportional to the grade of the car. Passenger cars require more automobile motors. Ordinary cars are equipped with at least 20-30, while high-end luxury cars need to be equipped with 60-70 or even hundreds. According to the estimate of a single price of 20 yuan, the average price of bicycles corresponding to ordinary cars and high-end luxury cars is 400-600 yuan and 1200-1,400 yuan. As exchanges take the mainstream, the consumption upgrade logic gradually became obvious, driving the expansion of the micro motor market.

3) Fluid technology: At the right time for cars to become intelligent, cleaning systems have ushered in a growth point. Demand for cleaning systems is expected to be upgraded in the context of intelligence. In the context of increasing vehicle intelligence, the increase in bicycle sensor usage is expected to spawn new sensor cleaning requirements, and demand for cleaning systems is expected to upgrade. The company has forward-looking and laid out an ADAS active sensing cleaning system, which will fully benefit from the upgrading of cleaning system demand and increased market space in the future.

Investment advice: The company is a leader in the domestic automotive micromotor field. The trend of intelligent & consumption upgrading is obvious, driving the company's business volume and price increase; the company's revenue is expected to be 1.079, 1.329, 1.568 billion yuan, and net profit to mother of 0.234, 0.296, 0.346 billion yuan, and EPS is 2.92, 3.70 and 4.32 yuan. The company's closing price on December 9, 2024 was 93.75 yuan, corresponding to 2024-2026 PE, 32.08, 25.31, and 21.68 times; the first coverage gave it an “increase in weight” rating.

Risk warning: Competition in the industry has intensified beyond expectations, price wars have led to price declines, shipments fall short of expectations, etc.