The company is a leading independent car lamp company in China. Since its establishment 30 years ago, it has focused on the production of automotive lamps, and has deep technical accumulation and customer accumulation. Sungwoo is a leading domestic enterprise. In recent years, the company has secured more high-quality customers and projects, achieved further optimization and upgrading of the customer structure and product structure, and is expected to achieve a fast track of performance growth and maintain a “highly recommended” investment rating.

The autonomous car lamp leader, which has been in existence for 30 years, can be expected to develop in the future. The company's products focus on the main automotive lighting business, and the increase in customer production is the main factor driving the company's performance development. Since the company went public in 2011, benefiting from joint ventures developed earlier and the increase in LED penetration, the company achieved rapid growth in performance. The CAGR of the company's revenue and net profit to mother during the 10-year period 2011-2020 were 23.5% and 24.0%, respectively. Since 2021, mainstream joint ventures have faced transformation difficulties and sales growth have slowed, so the company has begun to work with own-brand car companies such as FAW Hongqi and Wei Xiaoli. In the future, the company's core growth point is mainly to continuously gain a larger market share under the wave of intelligence through customer structure optimization and product upgrades. The company had deep deposits in customer and product technology in the early stages, and emerged independently in a new era, and future development can be expected.

Guided by user needs, future benefits from ADB and DLP product upgrades. The upgrading of vehicle electrification, intelligence, connectivity, and autonomous driving technology is driving the intelligent development of automotive headlights. The company benefits from LED and ADB headlamp upgrade opportunities brought by smart driving upgrade opportunities. The company has deep technical experience in ADB products. In 2019, ADB headlights were mass-produced. In 2020, the Hongqi H9 became the first model to mass-produce Xingyu ADB headlights. In December 2023, DLP headlights were already mass-produced on the M9 model. The company will benefit from LED, ADB and DLP headlamp upgrade opportunities brought about by smart driving upgrades; moreover, as the technological content of headlights increases and more personalized design, it is conducive to increasing the added value of products, thereby increasing the value of bicycles and further enhancing the company's profitability.

By actively optimizing the customer structure, the share of independent brands+new forces is expected to increase. 1) Benefiting from joint venture customers at the beginning of its establishment: the company reached cooperative relationships with joint venture customers such as FAW-Volkswagen at the beginning of its establishment to catch up with the golden age of joint venture brands through customer advantages; 2) Improved customer structure: After 2021, sales of the company's main customers, joint ventures such as FAW-Volkswagen and FAW-Toyota, were under pressure, and independent brands such as FAW Hongqi rose along the trend. The company actively sought cooperation on its own brands and laid out new energy vehicle companies; 3) Actively exploring overseas markets: Currently, the Serbian factory has entered the mass production stage, and projects from European OEMs have entered batch production in 2023 stage.

Maintain a “Highly Recommended” investment rating. As the company continues to promote projects such as ADB, DLP headlights and atmosphere lights, the value of bicycles has gradually increased; production capacity layout for new products has been strengthened, products and customers have developed smoothly, and in-hand orders have gradually begun mass production; and the Serbian factory has accelerated its contribution to the company's overseas performance. The company is expected to achieve net profit of 1.43/1.88/2.33 billion yuan in 24-26, maintaining a “highly recommended” rating.

? Risk warning: 1) The risk of fluctuations in the automobile industry is currently highly uncertain about the global economic growth outlook, which will directly affect automobile terminal consumption. 2) Automobile headlight products have a long development cycle and large upfront investment. If the sales volume of supporting vehicle models does not meet expectations, there is a risk that it will be difficult to recoup early investment. 3) Risk of declining gross margin As market competition in the automotive industry becomes more intense, automakers are under greater pressure to compete on costs.