Kunshan Huguang Auto Harness Co.Ltd(605333) (605333)
The value of automobile harness will increase to more than 80 billion yuan in 25 years
In the process of electrification and intellectualization, the single vehicle value of automobile harness is expected to rise: 1) electrification adds high-voltage harness, and the single vehicle value increases by about 1500 yuan; 2) More electronic appliances need to be equipped for intellectualization. Anbofu estimates that the length of the harness will be doubled for the non optimized L3 and L4 autopilot. We assume that the current single vehicle value of traditional vehicle harness and new energy vehicle harness is 2500 yuan and 4000 yuan respectively. It is expected that China’s passenger vehicle harness market space will reach 81 billion yuan by 2025, with a compound growth rate of about 8% from 2021 to 2025.
China’s independent harness manufacturers have a low share and large localization space
Automobile harness is an important functional part, which is related to automobile safety and driving experience. Vehicle manufacturers are more cautious about developing new suppliers. Globally, the automotive wiring harness market is highly concentrated. In 2018, the top four manufacturers Sumitomo Electric, Yazaki, anbofu and Lenny accounted for more than 75% of the global market. From the perspective of China, the CR10 of Chinese wire harness manufacturer is only about 20%, and the Chinese market is occupied by international leading joint ventures and wholly-owned companies in China.
Independent automobile harness manufacturers are expected to rise
The market share of independent vehicle enterprises hovers around 40% all year round, and the independent share of new energy vehicle market reaches 75%. In the future, Chinese wire harness manufacturers are expected to seize the opportunity of independent rise and electrification, improve the market share and promote the improvement of market concentration.
Three factors help Huguang grow into a leader in China’s auto wiring harness
We believe that the three characteristics of Huguang determine that it can break through the siege and become the leader of the industry in the future:
1) The active layout of intelligent production can improve the production efficiency of multiple links by more than 30%. Although the labor cost shows an upward trend, from the perspective of cost composition, the proportion of the company’s labor cost is still low, stable at the level of 13% – 14%;
2) Thinking from the perspective of customers, cutting-edge layout of R & D and manufacturing of small harness and aluminum harness, and actively respond to customers’ lightweight needs;
3) Taking advantage of the rise of China, the company continues to expand its customer circle, accelerate the pace of capacity expansion, add a new Chongqing manufacturing base and improve its regional layout.
In the short term, the company ushered in a rise in both volume and price
1) Volume: the company’s share in SAIC Volkswagen, the largest customer, is stable at 20% ~ 25%, and continues to break through T company, ideal, Mercedes Benz, SAIC GM, Chang’an Ford and other companies. A number of vehicle harness and high-voltage harness projects will be mass produced in 2022.
2) Price: the company has successively obtained fixed points for complete harness of high-end models such as Volkswagen Tuan family, Audi csuv and Changan Ford Lincoln MKX, realizing a breakthrough to high-end models, and the average price of complete harness is expected to be further improved. At the same time, the company has obtained several fixed-point and mass production of high-voltage harness projects, and the proportion of high-voltage harness with high value continues to increase.
Profit forecast
The company has the potential to become the leader of China’s automobile harness. In the short term, the volume and price will rise together, and the medium and long-term growth space will be opened. We expect that the company’s revenue from 2021 to 2023 will be RMB 2.48 billion, 3.82 billion and 6.03 billion respectively, with a year-on-year increase of + 62%, + 54% and + 58% respectively, and the net profit attributable to the parent company will be RMB 0.9 billion, 260 million and 480 million respectively, with a year-on-year increase of + 17%, + 196% and + 85% respectively, and the corresponding PE will be 102, 34 and 19 times respectively. First coverage, give buy rating.
Risk statement
The impact of the epidemic exceeded expectations, the supporting facilities of the supply chain were less than expected, and the price of raw materials fluctuated
