Autonomous seat frame leaders have welcomed a sharp rise in volume and price, and category expansion has blossomed. The company started as a mold maker and entered the zero automobile industry in 2008, and has worked hard for many years to become a leading independent seat rear frame company. In 2021, the seat frame moved from the back row to the front row to achieve an ASP upgrade, winning consecutive positions such as Cyrus and BYD. In 2022, we will expand our business to the fields of high-speed rail seats and containers based on process expansion. Currently, the company has orders in hand exceeding 13 billion yuan, and the annualized incremental revenue has reached more than 2.7 billion yuan.
Overall perception: The main business has proven itself, the expansion of categories is surprisingly honest, and the strategy is steady and progressive 1) The main business has proven itself in terms of share and profit: the company's seat frame assembly market share is 4.5-6%, being an independent leader, and the gross margin stabilized at 20% + until 2020.
2) The expansion of the product category is remarkable: entering the railway container business (precision stamping/welding), automotive electronic housing (injection molding), and high-speed rail seats (precision stamping+welding+injection) with excellent reputation 3) The strategy is prudent and steady, not blindly aggressive: the company's genes are stable and not blindly aggressive: the company's genetic stability focuses on the profit base, and capital expenditure at the beginning of the listing did not directly enter the seat assembly line in the short term. Currently, the company's main business and new business have all entered the harvest period. Later, with accumulated experience in high-speed rail chair projects, it entered the passenger car seat racing track.
Short to medium term: The profit inflection point has passed, and the release of performance driven by customers and new businesses has accelerated. 23Q2 is a profit inflection point. Driven by multiple BYD projects & Cyrus's new M7 orders exceeding expectations, it has entered a cycle of accelerated performance release. In '24, two new business containers+high-speed rail seats began to gain strength, which is expected to contribute to greater flexibility.
Medium to long term: Skeleton leaders enter seat assemblies, optimistic about the company's localization on passenger car seat tracks with large space and good layout.
The seats are high quality racetracks. 1) Large space: It is estimated that the country will be about 150 billion in 25 years, CAGR = 17%; 2) The pattern is good:
Global CR5 > 85%, domestic CR5 > 70%, and all are foreign; 3) Marginal acceleration of consumption upgrades promotes price increases & accelerates substitution:
Reasons for the solidification of the early pattern: 1) High barriers to entry for core safety components; 2) Technical barriers: foreign investment control for R&D talents throughout the chair.
Reasons for breaking the current situation: 1) The restructuring of the vehicle pattern has brought about new supporting relationships; 2) the new force 1-N has a strong will to cultivate the local supply chain based on both cost and response to demand;
The company's core advantages: 1) Skeleton technology foundation: The seat is the core safety component, the frame is an important source of safety, and the frame accounts for nearly 70% of the total seat investment.
2) The seat frame autonomous leader has accumulated a good customer reputation over the years and is expected to feed back the seat business.
Profit forecast: Expected revenue for 2023-2025 is 1.5 billion yuan, 2.74 billion yuan, and 3.18 billion yuan, with year-on-year growth rates of 34%, 83%, and 16% respectively, and net profit of 100 million yuan, 200 million yuan, and 300 million yuan, respectively, and year-on-year growth rates of 120%, 100%, and 47%, respectively. The corresponding PE for 23-25 is 41X, 21X, and 14X, respectively. Compared with comparable companies, the company's valuation is low. The current profit inflection point has been confirmed. The short-term M7 exceeds expectations and consolidates Q4 and next year's certainty. Next year, there are two more business volumes with greater revenue elasticity to support high performance growth. We are optimistic about the implementation of important mid-term option car seats and maintain the “buy” rating.
Risk warning: customer demand falls short of expectations, new business progress falls short of expectations, sharp rise in raw materials, risk of bias in industry size estimation, risk of public information used in research reports, risk of information delays or untimely updates