Xinbang Holdings: a leading supplier of automotive electroplated interior parts

The company is a leading supplier of plastic electroplated parts for automobiles in China, including internal handles, door trim panels, steering wheel parts and dashboards, etc., and interior parts account for more than 90% of the revenue. China accounts for the largest share of income, accounting for 42.5%, followed by North America, accounting for 31.6%. The company's revenue maintained steady growth from 2015 to 2019, with CAGR reaching 15.3%. The net profit of homing is greatly affected by the production interruption of Wuxi base at the end of 2018, with the CAGR of-2.0% in 2015-2019; if 2019 is removed, the CAGR is 21.2%.

What are the core strengths of the company?

We believe that the company's core advantages mainly include: 1) the automotive electroplating industry has high barriers to entry, including environmental protection qualifications, capital and technical barriers; 2) the company has a global production capacity layout. At present, it has five domestic production bases and one overseas base, with an annual electroplating capacity of about 4.19 million square meters. At the same time, the company has an excellent customer base, including head car companies Daimler, GM, Volkswagen, as well as first-tier suppliers TRW, Virginia, etc. 3) the company attaches importance to R & D investment and continuous process improvement, and the proportion of 2020H1 R & D expenditure in revenue has increased to 3.7%, which has continued to increase in the past few years. 4) the company's one-stop service business model and high quality product rate make the company's profit margin higher than that of its peers. 5) sufficient on-hand orders and high visibility. It is conservatively estimated that the order volume will reach 2.38 billion RMB in 2021.

Current investment logic

1) performance reversal: as the impact of the production interruption in Wuxi base gradually fades, the company will benefit from the demand replenishment after the easing of the domestic epidemic and the gradual recovery of overseas markets next year. The increase in capacity utilization will boost the company's profitability; 2) the company has entered Tesla, Inc. 's supply chain and will continue to benefit from the increase in Tesla, Inc. 's sales scale in the future. At the same time, Tesla, Inc. 's endorsement will help the company to open up other new energy customers, gradually upgrade to Tie one manufacturers in the electrification wave, and increase domestic / global share.

Give a "buy" rating with a target price of HK $5.6

As a leading supplier of electroplated automobile interior parts in China, the company will fully benefit from the recovery of demand in the post-epidemic cycle. Moreover, the company has successfully entered Tesla, Inc. 's supply chain, the related orders are increasing, and the cooperation with NIO Inc., XPeng Inc. and other new car-building forces is also gradually increasing. We think that the company has early layout and obvious advantages in the direction of new energy vehicles. Broad prospects for development. We predict that the company's 2020 and 2021 EPS in 2022 will be 0.33, 0.48 and 0.65 respectively, giving the company a target price of HK $5.60, corresponding to 10 times PE in 2021, with a "buy" rating for the first time.

Risk hint

Local environmental protection policy risk of production base

The recovery of industry demand is not as expected.

Overseas epidemic control is not as expected.