\u3000\u3000 Anhui Zhongding Sealing Parts Co.Ltd(000887) (000887)
Event overview: on January 13, 2022, the company announced that Anhui Zhongding Sealing Parts Co.Ltd(000887) Sun Company Chengdu WANGJIN Auto Parts Co., Ltd. recently received a customer notice and Anhui Zhongding Sealing Parts Co.Ltd(000887) became a batch supplier of chassis lightweight assembly products for two new platform projects 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 767 million yuan.
Chassis lightweight assembly products have been designated by China’s top new energy vehicle enterprises, and the total amount of fixed points for lightweight projects has reached 1.883 billion yuan.
The company vigorously develops the business of intelligent chassis system and arranges chassis lightweight system assembly products. Lightweight chassis products such as aluminum alloy control arm assembly have high single vehicle value and are the core components to achieve operational stability and comfort. Sichuan WANGJIN, a subsidiary of the company, has the world’s leading technology in the field of lightweight. The core product ball joint hinge assembly is the core safety component and performance component of the chassis system. Up to now, the company’s total orders for lightweight products have reached 1.883 billion yuan. This fixed point lays a foundation for the company to further expand the market of lightweight chassis products in the future.
The smart chassis strategy has achieved initial results, with a cumulative fixed amount of RMB 8.594 billion in China. The “incremental track” is expected to open the company’s growth space and drive the company’s performance valuation.
The highest point of the company’s last auto industry cycle was in 2017, with a net profit attributable to the parent company of 1.127 billion yuan and a net profit attributable to the parent company of 493 million yuan in 2020. We expect the net profit attributable to the parent company to reach 1.05 billion yuan in 2021. 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 has ushered in a high-level performance inflection point. At present, the company’s basic business revenue (automobile sealing and shock-absorbing rubber) has ranked among the top 100 global parts. The cost advantage brought by large-scale, high-quality customer structure, and the deep absorption and localization of overseas advanced technology provide the company with stable cash flow. In addition, the company has established the intelligent chassis strategy (thermal management pipeline assembly, lightweight and air suspension system), mastered the core technology through high-quality M & A, realized localization through reverse investment, and has the first mover advantage. It is expected to quickly seize the market in the transition period of electric, intelligent and lightweight industry. Up to now, the company’s intelligent chassis has won a total of 8.594 billion yuan of fixed-point projects in China, including 4.962 billion yuan of thermal management, 1.883 billion yuan of lightweight and 1.75 billion yuan of air suspension. Incremental business is expected to significantly open the company’s second growth curve and drive the company’s performance and valuation.
Investment suggestions:
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.
Risk tips:
Raw material price fluctuations lead to low gross profit margin, less than expected new product expansion, exchange rate risk, etc.
