\u3000\u3000 Anhui Zhongding Sealing Parts Co.Ltd(000887) (000887)
Event overview: on February 15, 2022, the company announced that Anhui Zhongding Sealing Parts Co.Ltd(000887) subsidiary Anhui Zhongding Damping Rubber Technology Co., Ltd. recently received a customer notice that the company has become a batch supplier of chassis lightweight assembly products for the new platform project of a new energy brand main engine factory in China. The life cycle of the project is 5 years, and the total amount of the life cycle is about 1.179 billion yuan.
The chassis lightweight assembly product was again designated by the main engine factory project of China’s top new energy brand, and the total amount of designated points for lightweight projects reached 4.273 billion yuan.
Chassis lightweight business is an important link for the company to realize the strategic transformation of intelligent chassis. Sichuan WANGJIN, a subsidiary of the company, has the world’s leading technology in the field of lightweight. The core product ball joint hinge assembly is the core safety component and performance component of chassis system. Chassis lightweight assembly products have previously received orders from Chinese head main engine manufacturers such as Byd Company Limited(002594) and many head new energy brand main engine manufacturers, with high-quality customer structure. This time, it was once again designated as the product of chassis lightweight assembly for the new platform project of a new energy brand main engine factory in China, which fully shows that the layout of the company in the field of chassis lightweight system assembly has achieved initial results, and the lightweight track continues to work. Up to now, the total accumulated order amount of the company’s lightweight products has reached 4.273 billion yuan. Assuming that the average life cycle of the designated chassis lightweight project is 5 years, the domestic chassis lightweight project obtained by the company has contributed about 855 million yuan of revenue every year.
The intelligent chassis business has made full efforts to “comprehensively meet the electric intelligent transformation of the industry and drive the performance valuation of the company”.
The value of the company’s traditional automobile damping and sealing rubber business is only a few hundred yuan. The value of the intelligent chassis business hollow suspension (intellectualization), chassis lightweight assembly (lightweight) and thermal management pipeline assembly (electrification) is tens of thousands of yuan. The value of the intelligent chassis business has increased significantly. At present, the company’s traditional business revenue has ranked among the top 100 parts in the world. Large scale brings cost advantages, high-quality customer structure, as well as the in-depth absorption and localization of overseas advanced technology, providing the company with stable cash flow. The company makes every effort to promote the smart chassis strategy, master the core technology through high-quality mergers and acquisitions, realize localization through reverse investment, and has the first mover advantage. It is expected to quickly seize the market in the transition period of electric, intelligent and lightweight industry, and become the global leader in automotive electronic parts. As of the announcement, the total amount of air suspension projects in China has reached RMB 14.5 billion, of which the total amount of fixed-point suspension projects has reached RMB 4.5 billion, including RMB 4.5 billion. The simultaneous rise of incremental business volume and price is expected to significantly open up the growth space of the company and drive the “double click” of the company’s performance and valuation.
Investment suggestion: it is estimated that the company will achieve a revenue of RMB 13.028/13.715/14.929 billion and a net profit attributable to the parent company of RMB 1.050/11.50/1.388 billion from 2021 to 2023. The current market value corresponds to 21 / 19 / 16 times of PE from 2021 to 2023. The company’s valuation is significantly lower than 32 times the average valuation level of Shenwan parts sector in 2021 (wind unanimously predicted). With the cyclical recovery of the company’s performance and the continuous promotion of the smart chassis strategy, as a global leading company of parts and components, it is expected to enjoy a valuation premium and maintain the “recommended” rating.
Risk tip: the price fluctuation of raw materials leads to low gross profit margin, less than expected expansion of new products, exchange rate risk, etc.
