\u3000\u3 Bohai Water Industry Co.Ltd(000605) 068 Mingxin Automotive Leather Co.Ltd(605068) )
Event: the company released the shareholding increase plan of controlling shareholders, actual controllers and some senior executives. Based on the confidence in the future sustainable development of the company and the recognition of the long-term value investment of the company, the major shareholders and senior executives of the company plan to increase their holdings of the company’s shares within 12 months, accounting for 0.5% – 1% of the total share capital. 1. The lack of core in phased industries and the pressure of raw materials do not change the long-term investment value. From 2020 to 2021, the industry is facing many pressures, especially since last year, the company’s core customers lack a large number of cores, resulting in a decline in production and sales, and the price of raw material cowhide has increased, resulting in periodic pressure on the company. However, the company is a leading automotive leather supplier in China. It is steady and deep supporting FAW Volkswagen. New customers and new projects such as SAIC Volkswagen and SAIC GM are gradually climbing, and will further contribute to revenue in the future. At the same time, the company is actively exploring new customers, actively docking with new forces of Chinese car making and traditional car enterprises, and is expected to make a new breakthrough in key customers in 2022.
2. Lead the revolution of green materials and take the lead in water-based super fiber materials in the world. Although the company started with leather business, it began to develop green materials – Water-based super fiber after 2017, and successfully developed super fiber velvet from 2019 to 2020, which won high praise from FAW Volkswagen and replaced the international mainstream brand Alcantara. The company is also the first enterprise in China to research and develop water-borne super fiber velvet. It not only obtains customer certification in technology, but also outperforms overseas competitors in cost and service capacity, with strong development momentum. Then, the company gradually developed water-based microfiber leather and further explored the product price. This product is expected to replace the oily PU leather in the car in the future, with a broad market space. From genuine leather to green water-based materials, the company has covered the mainstream application materials in the car at this stage, and has excellent R & D ability. It is a leading enterprise in the field of interior materials.
3. Orderly expansion of production capacity. The planned production capacity of the company is expected to reach 2.5 billion in 2025. 1) By the end of 2021, the company’s leather production capacity has reached 1.1 million, and it is predicted that 500000 pieces of IPO projects will be produced by the end of 2023. At that time, the leather production capacity will be 1.6 million, and the predicted output value will be about 1.5 billion. 2) For water-based super fiber materials, the company has a production capacity of 2 million square meters in Xuzhou, with an output value of about 200 million; At the same time, the company has passed the convertible bond plan and plans to raise no more than 680 million yuan for the expansion of the production of all water-based super fiber materials with an annual output of 8 million square meters. It is expected that the new output value will be about 800900 million, and the total output value of water-based super fiber will reach 1-1.1 billion after being put into operation. According to relevant plans, the total production capacity of leather and water-based super fiber of the company will reach 2.5 billion in 2025. Assuming full production, it is predicted that the compound growth rate will reach 32% from 2021 to 2025
4. Green environmental protection orientation will promote the innovation of interior materials. At this stage, the interior materials are mainly oily Pu, PVC and other low-end materials. Oily PVC needs to be added in the production process, such as fillers, stabilizers, accelerators, colorants and flame retardants, which will have an impact on the environment and the body. The global advocacy of green environmental protection and carbon neutralization will promote the innovation of material technology. Water-based super fiber materials are expected to gradually replace low-end PVC and PU. As an industry leader, the company has not only been recognized by the global public, but also has the foundation and ability to expand more customers.
Investment strategy: Although the company is under pressure at different stages, it does not change its excellent R & D ability and scarcity, so it has long-term investment value. We expect the company’s net profit attributable to the parent company in 21 / 22 to be 176 / 250 million. At present, the stock price corresponds to only 16 times of the company’s dynamic PE in 2022, giving a “buy” rating.
Risk tip: the sales volume of customers is lower than expected, and the cost of raw materials continues to rise due to international influence.
