Shuanglin Co., Ltd. is an established auto parts company with a diverse range of products. The company was founded in 2000. At the beginning of its establishment, it mainly deals in automotive seat system parts, injection molding parts and molds. In 2014-2018, the company successively entered the automobile wheel bearing, NEV power system, and automobile automatic transmission industry. Through years of technology accumulation and product integration, it has now formed four major products: seat components (car seat horizontal drives and seat motors), automotive injection parts (automotive interior and exterior parts, precision parts, etc.), wheel bearings, and new energy electric drive systems.

In the company's diverse product line, it has both traditional products (seat components, wheel bearings) that are growing steadily, and is also actively innovating good products (flat wire motors, ball/column screws) with wider application prospects. We believe that the company is currently in a new year of growth and will gradually fulfill its alpha capabilities in product innovation.

Seat components (traditional products): including seat core components such as seat horizontal drives (HDM), horizontal rail motors, lift motors, and backrest angle adjustment motors. Among them, the company's HDM products lead the domestic market share. As the automotive industry's requirements for seat space comfort increase, seat level adjustment distances will be longer and applications will increase in the future; in addition, noise reduction requirements for new energy vehicles have increased, and PEEK materials have been used in seat horizontal drives. The company has been deeply involved in manufacturing capabilities to improve the accuracy, performance and longevity of HDM products for many years, and also has innovative capabilities. It has cooperated deeply with head seat companies to indirectly support leading North American new energy car brands, BYD, and Ideal.

Wheel bearings (traditional products): The global bearing market is dominated by foreign investment, and some domestic bearing manufacturers are gradually breaking through the middle and low end markets to the high-end market. Compared with imported bearings, the gap between domestic bearing products is mainly reflected in accuracy, performance and longevity, which is affected by bearing materials, special equipment and processing technology (especially heat treatment and grinding). The company has deep technical accumulation in the field of wheel bearings, covering the domestic OEM market and overseas AM market, and is one of the top ten domestic bearing manufacturers. In the domestic market, the company obtained a new supporting project from SAIC Audi in 2024, achieving a breakthrough for high-end joint venture customers, and is expected to obtain more supporting opportunities in the high-end market in the future. In overseas markets, the company has invested overseas in the New Torch Thailand factory. Some products have obtained a certificate of origin in Thailand, which is expected to ease the tariff pressure on exports to North America in the future.

Ball/column screw (new product): A ball screw is composed of a screw, a nut, a reversing device, and a steel ball, and a planetary roller screw is composed of a screw, roller, and nut. Among them, the screw processing process is longer and more difficult. The core is heat treatment and grinding. These two points are also the core aspects of bearing manufacturing. With the production of HDM and bearings in the past, the company has accumulated how to control accuracy, performance, and life, and has a technical foundation in developing and producing screw products. At present, the company has completed the manufacture of automotive ball screw samples. The samples are undergoing tripartite verification, and it is expected that the EHB brake ball screw bearing project will soon be fixed; the company's roller screw products have also been developed and samples, and a trial production line is under construction.

New energy electric drive system (new product): The electric drive system for new energy vehicles consists of a drive motor, a motor controller, and a speed reducer. The core upgrade direction includes flat wire motors and integrated technology. In 2024, the company's three-in-one flat wire motor products are increasing at an accelerated pace. At the same time, it also acquired the BAIC Foton Electric Project and the Wuling Commercial Vehicle Motor Electronic Control 2-in-1 Electric Bridge Project, and actively engaged in technical exchanges and plan formulation with customers such as GAC, Zero Run, and Chery. It is expected that future revenue and gross margin will continue to increase.

Investment advice: Market concerns mainly focus on the stability and growth of the company's performance. We believe that the impact related to the current early acquisitions has ended, actual business performance has improved, and there is a driving force for further progress. As new products with better application prospects gradually advance, it will further open up the company's room for growth. We expect the company's 2024-2026 net profit of 0.46 billion yuan (including 0.12 billion performance compensation), 0.4 billion yuan, and 0.48 billion yuan, corresponding to growth rates of +465%, -13%, and +20%, corresponding to 21, 24, and 20 times PE on October 22, 2024, covered for the first time, and given a “buy” rating.

Risk warning: macroeconomic fluctuations, increased overseas trade frictions, increased competition in the automotive industry, the pace of development and implementation of new products falls short of expectations, customer development falls short of expectations, etc.