Kodali has been deeply involved in the field of structural parts for more than 20 years, leading the industry in profitability. As early as 1999, the company provided products such as automotive structural parts to BYD customers. Later, in 2007, it entered lithium battery structural parts and successfully expanded overseas customers such as Panasonic, Samsung, and LG. Since the company went public in 2017, new production capacity at home and abroad has been gradually released, and the customer structure has focused on domestic power battery customers, led by the Ningde era. Thanks to excellent management level, quality control level and technical leadership, the company's gross margin and net margin levels stabilized at more than 20% and 10% respectively in 22-23 and 1Q24, respectively, and the profit level was in a leading position in the industry.
Downstream demand is booming, and with the profit gap widening, the industry is expected to clear up at an accelerated pace. The penetration rate of downstream new energy vehicles continues to rise. Demand for energy storage continues to rise, and demand for lithium battery structural components has maintained a long-term boom. The customized properties of lithium battery structural parts require structural component suppliers to maintain long-term collaborative development relationships with battery manufacturers. Manufacturers that pioneered lithium battery structural components continue to improve and innovate equipment, molds, and processes, and gradually have a certain first-mover advantage. Judging from the industry pattern, we estimate that the company's share of the global lithium battery structural components market stabilized at about 30% in 21-23. Since '23, the profit gap between Kodali and second-tier companies has widened, and the expansion of production in the industry has gradually slowed. Looking ahead to 24, as the profit gap between Tier 1 and 2 manufacturers in the industry widens, the competitive trend in the industry is expected to slow down, and the company's leading profit advantage is expected to be further consolidated.
The flywheel effect has established a cost advantage. Overseas development has entered a harvest period, and new momentum for development is gradually cultivated, and I am optimistic that the company's development will be steady and far-reaching.
The company's development has a flywheel effect. Product, production capacity, and customer make up the three elements of the flywheel effect of structural components. On the product side, the company has modular production capacity, and can accelerate product iteration based on equipment and skilled mold workers. On the production capacity side, the company's production capacity has gradually achieved global coverage, and the advantages of localization support are obvious. On the client side, the company has product support among the world's major power battery manufacturers, and its customer structure is quite diverse and comprehensive. In particular, the core customer share is stable.
Overseas development has entered the harvest period. Currently, the penetration rate of new energy vehicles in Europe and the US is low. As European and American policies encourage the establishment of a local battery supply chain, the company has taken the lead in setting up overseas bases in Europe and other countries as a leading global structural parts company, and has signed procurement agreements with many overseas battery manufacturers. In 24-25, with the accelerated release of battery production capacity in Europe and the US, the company's overseas revenue is expected to grow rapidly, while increasing unit profit.
New momentum for development is gradually being cultivated. 4680 batteries and small steel cases for consumer batteries are all incremental demand for lithium battery structural parts in the future. The company has leading R&D and mass production advantages in new fields, and is expected to take the lead in benefiting from the development of new momentum in the industry. The company lays out a high-profit robot parts market, targeting the demand for industrial and humanoid robots, and is expected to open up a new growth engine.
First coverage, giving a “buy” rating. We expect the company's net profit to be 1.416/1.723/2.077 billion yuan respectively for 24-26, corresponding to the closing price of PE on July 24, 14/12/10 times, respectively. Considering the company's cost leadership and profit elasticity in the industry, we gave the company a 24-year PE valuation of 19 times (average PE per industry comparable company), covered for the first time, and gave it a “buy” rating.
Risk warning: the risk of a sharp rise in raw material prices; the risk of a sharp drop in product prices due to increased competition in the industry; the risk of overseas trade protection policies.