\u3000\u3000 Wencan Group Co.Ltd(603348) (603348)
Decades of accumulation of high barrier aluminum body structural parts has created an independent leading market position
Different from traditional automotive aluminum die castings such as power system cylinder shell, body structural parts belong to thin-walled safety parts. The performance indexes such as product strength and elongation require high requirements for die casting and heat treatment process. The company is a pioneer in China’s body structural parts. It has a deep accumulation of know-how in high vacuum die casting and other processes. It is a leader in the industry in mold self-making ability. It is one of the few Tier1 in China that can supply body structural parts of many main engine factories such as Mercedes Benz, Weilai and Tesla in batch. It has a significant first mover advantage. The lightweight demand of new energy vehicles is accelerating the penetration of aluminum body structural parts (replacing traditional sheet metal stamping parts). The company’s body structural parts business is growing at a high speed. In the first half of 2021, the company achieved a revenue of 240 million yuan, a year-on-year increase of 82.5%, accounting for 5 percentage points to 28% of the revenue of the company’s headquarters (excluding Bailian).
The position of the industrial chain has changed from tier2 to Tier1, and the proportion of new energy customers has gradually increased
The company’s traditional customers include global Tier1 such as ZF, Bosch, continental and magna. The supporting products are mainly die castings of power, chassis and braking system. With the increasing demand of the body structure business and the new forces of car making, the proportion of OEM customers such as Mercedes Benz and Weilai continued to increase. The sales revenue of H1 new energy customers in 2020 and 2021 was about 298 million yuan and 268 million yuan respectively, with a year-on-year increase of 39% and 166% respectively, accounting for about 19% and 31% of the revenue of Wencan headquarters respectively.
Automotive aluminum die casting platform expert, integrated die casting is expected to achieve China’s independence and take the lead in breaking the situation
In 2020, the company acquired France Bailian Group, and the process chain is further supplemented by low-pressure and gravity die casting. It is expected to grow into a platform supplier of high barrier die casting in the future, and realize the layout of global customers and bases. In addition, the application trend of automotive integrated die-casting technology led by Tesla is relatively clear, and new forces such as Weilai are rapidly following up. Based on the experience accumulated in the existing thin-wall high vacuum die-casting process, the company has gradually implemented the large-scale die-casting machine project with more than 6000 tons, which is expected to achieve a breakthrough in the industrialization of the rear base sector.
Investment suggestion: profitability repair superposition integrated die casting β， “Buy” rating
In 2021, the company’s profitability is affected by the shortage of chips from core customers and the rise in the price of raw materials. In 2022, the revenue growth of body structure business is expected to be close to 50%. Superimposed on the marginal positive factors such as the recovery of capacity utilization and the stabilization of aluminum ingot price, the profitability is expected to be repaired. In addition, the acceleration of the integrated die casting industrialization of China’s new forces of car making is expected to strengthen the company’s core competitiveness. It is expected that the company’s net profit attributable to the parent company from 2021 to 2023 will be about 81 million yuan, 314 million yuan and 524 million yuan respectively, corresponding to 148, 38.4 and 22.9 times of PE respectively, and will be given a “buy” rating for the first time.
Risk analysis: the price of aluminum ingots has risen sharply, the supply of automobile chips has deteriorated, and the downstream demand is less than expected.
