Anhui Zhongding Sealing Parts Co.Ltd(000887) (000887)
1、 Event overview
On December 23, 2021, the company announced that: Anhui Zhongding Sealing Parts Co.Ltd(000887) recently received a notice from customers that the company has become a batch supplier of air supply unit assembly products of air suspension system for a 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 life cycle amount is about 470 million yuan.
2、 Analysis and judgment
The air suspension system has won another order, and the total amount of orders for domestic projects has reached 1.75 billion yuan. The localization of air suspension assemblies by global assembly manufacturers is expected to take the lead in the rapid improvement of air suspension penetration
AMK is the global assembly supplier of automotive air suspension system, mainly supporting Jaguar Land Rover, Volvo, Mercedes Benz and other high-end customers. In July 2018, AMK China subsidiary Anhui AMEC was established, set up a technology center in Shanghai, and built a production base in Anhui to promote the localization of air suspension products and open the Chinese market. AMK suffered losses due to the downturn of the global auto industry boom cycle and the disturbance of the epidemic situation, but it also accelerated the company’s overseas integration and the progress of production, R & D and localization. The company gives full play to AMK’s advantages as an assembly supplier in the field of air suspension, realizes M & A integration, and quickly realizes the supporting of vehicle manufacturers in the Chinese market through in-depth localization. Domestic air suspension system projects have been designated again, and the cumulative order scale of air suspension system Chinese projects has reached 1.75 billion. The company is expected to take the lead in the rapid improvement stage of air suspension permeability and quickly seize the market.
The inflection point of performance in 2021 is determined, and air suspension, thermal management and lightweight drive a new round of growth period
The company’s net profit attributable to the parent company at the high point of the last cycle of the automotive industry was 1.127 billion yuan, and the net profit attributable to the parent company in 2020 was 493 million yuan. It is expected that the net profit attributable to the parent company in 2021 is expected to reach 1.005 billion yuan. With the cyclical recovery of the automotive industry, repeated immunization against overseas epidemics and the promotion of the company’s intelligent chassis strategy, the company will usher in an important performance inflection point. At present, the company has established an intelligent chassis strategy based on the basic disk business (sealing and damping) (thermal management pipeline assembly, lightweight, air suspension system) is an incremental business, which has certain technology and customer first mover advantages. The subsequent basic business is expected to contribute stable cash flow to the company, and the incremental business opens up the company’s market space and a new round of high-quality growth period.
3、 Investment advice
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 26 / 24 / 20 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.
4、 Risk tip: raw material price fluctuation leads to low gross profit margin, new product expansion is less than expected, exchange rate risk, etc
