\u3000\u3 Shengda Resources Co.Ltd(000603) 997 Ningbo Jifeng Auto Parts Co.Ltd(603997) )
We have been deeply engaged in the interior decoration of seats for decades, acquired overseas leaders and improved the product matrix of seat assemblies. The company started from 3C accessories of headrests, armrests and other seats, and has 25 years of experience in automobile interior production and marketing. In 2019, the company realized the merger and acquisition of German grammer, the European seat leader, and expanded into the field of commercial vehicles. At the same time, the headquarters + grammer has formed a complete product matrix of seat assembly and cooperated to obtain high-quality customer resources from several world-famous vehicle manufacturers.
The trend of diversified functions of seat safety parts gives new increment, and Tier1 is transformed into a Chinese manufacturer to seize the market. Car seats and headrest armrests are 3C safety parts. With the rapid development of electrification and intelligence in the whole demand side automobile industry, seats are also upgraded from a single safety part to multiple functions. The concentration of seats in the midstream is high. Overseas Cr5 is Tier1 in the supply chain and has occupied the main market share for a long time. In 2019, Cr5 accounted for 73% and 67% of the global / Chinese market share respectively. Most Chinese manufacturers are tier2, with decentralized concentration. Now they mostly aim to expand their business line to Tier1 seat integration. According to mordorintelligence, the global seat market will officially enter the 100 billion market in 2022, reaching US $103.7 billion, and the CAGR will be 5.27% in the five years from 2021 to 2026; According to China economic intelligence network, China’s seat market will be about 85 billion yuan in 2022, and the CAGR will be 4.7% from 2021 to 2025.
Acquisition of overseas leader grammer, traditional + new business, and jointly start the second growth. Grammer will turn losses into profits in 2021, and there is still much room for rebound in revenue scale and profitability compared with 2019. Grammer and the company strengthen synergy, expand outward and stabilize internally, and jointly start the company’s secondary growth: 1) business expansion: the company’s single tier2 product supply mode composed of original headrest + armrest was transformed into a complete Tier1 seat assembly product matrix after the merger and acquisition of grammer, which significantly increased the value of single car by more than 10 times. The company’s passenger car seat assembly business has achieved a fixed point from 0 to 1. The mass production of new interior products and hidden electric air outlets is about to contribute a new profit growth point. Actively develop and upgrade products horizontally and vertically, and the forward-looking layout of diversified functions is expected to seize the new market of cockpit in the future; 2) Stable cost: compared with overseas seat assembly manufacturers, the company has stable operating efficiency and cost control ability. The gross profit margin of the headquarters is significantly higher than that of overseas seat leading manufacturers. With the continuous implementation of market business, global joint procurement, technology sharing and other measures with grammer, the company continues to optimize the cost management of the headquarters. The company is expected to maintain a strong cost control advantage against the background of weak foreign profits, Create potential opportunities for localization.
Profit forecast, valuation and investment rating: the company is a leading cockpit interior supplier in China. After the acquisition of grammer, the company built a product matrix such as armrest, headrest and seat assembly, and the value of single vehicle increased significantly. We expect the company to achieve operating revenue of RMB 18.099 billion, 19.653 billion and 21.424 billion from 2022 to 2024, with a year-on-year increase of 7.53%, 8.59% and 9.01%. The net profit attributable to the parent company was RMB 338, 565 and 871 million, with a year-on-year increase of 167%, 67% and 54%, corresponding to EPS of RMB 0.30, 0.50 and 0.78. Based on the closing price on April 19, 2022, the current market value of the company is 9.177 billion yuan, and the corresponding PE from 2022 to 2024 are 27.2x, 16.2x and 10.5x respectively, slightly higher than the average level of comparable companies. The company is rated as “overweight” for the first time.
Risk tips: 1) the risk that the sales volume of passenger cars in the terminal market does not meet the expectation; 2) The risk that the continuous rise in the price of raw materials will affect the profitability of the company; 3) Based on the risk of data information lag.
