The company has been deeply involved in the cable industry for more than 70 years. It is the world leader in flat electromagnetic wires and an advantageous enterprise in the cable industry. The company's electromagnetic wire business ships all flat electromagnetic wires, with the highest shipment volume in the industry. Our customers cover leading manufacturers of transformers and motors for new energy vehicles. As customers continue to expand, profitability continues to improve; the company's wire and cable business has ranked first in Hunan Province for 18 consecutive years, and has been deployed in many provinces, further increasing market share. We are optimistic about the company's long-term growth, giving the company a target stock price of 12 yuan for 2024, coverage for the first time, and a “buy” rating.
A veteran in the cable industry, with a steady increase in profitability. The company has been deeply involved in the cable industry for more than 70 years. It is a leading global flat electromagnetic wire integrating R&D, production and sales, and an advantageous enterprise in the cable industry. In 1952, the company acquired the assets of the former Hunan Hengyang Cable Factory through a subsidiary and was established. In 1956, the company began producing plastic insulated wires. In 1985, the company obtained the first certification certificate for electrical products in China's history. It was the first ordinary plastic wire manufacturer in Hunan Province, and won the highest honorary award for wire products and the National Silver Award. In recent years, the company's revenue & profitability advantages are obvious. From 2017 to 2022, the company's operating income CAGR was 27.23% and net profit CAGR was 24.51%, reflecting the company's high-quality product expansion capabilities and cost control capabilities.
Electromagnetic wire: leading enterprises in pure flat electromagnetic wires, from transformers to motors for new energy vehicles. Flat wire motors have advantages in terms of motor efficiency and material costs. We believe that as configurations such as 800V and high-voltage fast charging gradually become standard, major automakers and motor companies gradually release new models equipped with flat wire motors, and the increase in the penetration rate of flat wire motors is extremely certain: we expect demand for flat wire to rise to 217,000 tons in 2025, with corresponding profit margins of 1.63 billion yuan. The company's electromagnetic wire products are all flat electromagnetic wires. According to the company's announcement, its flat wire shipments rank first in the industry. It is one of the few electromagnetic wire manufacturers in China that can cover the two major application fields of transformers and motors at the same time. Customers include transformer manufacturers such as ABB and Siemens, as well as new energy vehicle manufacturers such as Great Wall, NIO, Xiaopeng, and Ideal.
Wire and cable: Focusing on the wire and cable industry for more than 70 years, from being number one in Hunan to leading the country. According to data from the National Bureau of Statistics, the wire and cable industry has a market space of over trillion dollars, a wide range of industry segments, and many industry participants. The company has focused on the cable industry for more than 70 years and has 4 major cable brands. The products mainly include electrical equipment wires+power cables+special wires and cables. The company's location advantage is obvious. The company's official website shows that it has ranked first overall in the cable industry in Hunan Province for 18 consecutive years. We believe that by building bases and brand layout in Sichuan, Hubei, Jiangxi, etc., the company will build a leading cable enterprise in the country and further increase the market share of the industry.
Risk factors: New energy vehicle sales fall short of expectations; risk of increased industry competition; risk of large fluctuations in raw material prices; recovery of the real estate industry falls short of expectations; and the company's new customer development falls short of expectations.
Profit forecast, valuation and rating: The company's electromagnetic wire business has gradually expanded from transformers to motors for new energy vehicles, with outstanding growth; the wire and cable business is gradually opening up new markets, and the market share will further increase. We refer to the electromagnetic wire industry's comparable company Jingda Shares (Wind unanimously anticipates 16x PE, 0.8xPEG in 2024), and the wire and cable business is comparable companies Xinya Electronics, Wanma shares, Xinhongye, and Qifan Cable (2024 Wind unanimously expects an average of 15x PE, an average of 0.5x PEG), comprehensive evaluation of PE In terms of value and the PEG valuation method, we gave the company 15 times PE in 2024, corresponding to a reasonable target market value of 7.3 billion yuan, corresponding to the target stock price of 12 yuan, coverage for the first time, and a “buy” rating.