Current investment tips:
Fundamentals: China is an advanced manufacturer of precision metal parts, with continuous cultivation in 3C field and high growth in automobile direction. Founded in 2002 and headquartered in Jiaxing, Zhejiang Province, the company mainly provides customized precision metal parts for 3C laptop, automobile, communication and power equipment industries. The company has worked in the 3C field for many years, and the embedded nuts and SMD fasteners for laptop are the first to realize import substitution. The global share of single products exceeded 40% from 2019 to 2021. It is a long-term qualified supplier of mainstream electronic manufacturers such as Renbao, Lianbao and Heshuo; Since 2015, the company has increased the market development of new energy vehicles. Since 2020, the product volume has increased. In 2021, the proportion of revenue has increased to 13.6%, with a year-on-year increase of 7.68pct. Vehicle products have entered the supply system of several head auto parts companies. As of the disclosure date of the prospectus, the company has obtained the direct supplier code of Weilai automobile. The precision fastener production process and product technology of the company are leading in the industry. The important parameters of the products, such as processing accuracy, processing surface quality, output error rate and scrap rate, are better than the main competitors in the industry. In terms of performance, the cost of raw materials rose, and the income increased without profit during the reporting period. The CAGR of revenue in 19-21 years is 36.3%; The CAGR of net profit attributable to the parent company from 19 to 21 is – 2.75%. The gross profit margin in the 21st year is 24%, and the net profit margin is 9%.
Issuance plan: this new share issuance adopts direct pricing, strategic placement and over placement. The subscription date is May 23, 2022, and the subscription code is “889223”. The initial issuance scale is 37.9 million shares, accounting for 25% of the total share capital of the company after the issuance (before the exercise of over allocation). It is expected to raise 122 million yuan, and the total market value of the company after the issuance is 487 million. The issuing price of new shares is 3.21 yuan / share, which is the same as the reserve price. The issuing PE (TTM) is 21.17 times, and the median PE (TTM) of the industry in recent January is 30.5 times; The median PE (TTM) of comparable listed companies in recent January was 22 times. Online top grid subscription needs to freeze 5.7786 million yuan of funds, and a total of 10 war investors have been introduced for offline strategic placement, including 3 securities companies and 7 private placement.
Calculation of winning rate: assuming that the participation rate of this new round is 4% – 5%, the scale of frozen funds of a single household is 150000, and the winning rate range is expected to be 0.308% – 0.385%.
Industry situation: extensive downstream demand. In the 3C field, the demand is expected to develop steadily on a high base, and the upgrading demand brought by the improvement of product performance is the main driving force. In the automotive field, the competition pattern of traditional vehicles is solidified, and the incremental demand in the field of new energy vehicles is considerable. Aerospace has strict requirements on product performance, and there are opportunities for import substitution. In the medical field, China’s medical devices have developed into the second largest medical device market in the world. As an indispensable fastener or functional part of medical devices, precision parts will fully benefit from the growth of the industry. The market has higher requirements for product integration and synchronization. In consideration of supply chain efficiency, delivery safety and cooperation stickiness, customers prefer a product portfolio formed by multiple precision metal parts provided by the same supplier. With the acceleration of downstream products and technical iteration, the requirements for enterprise technical level, automation and personalized production capacity are increased.
Subscription suggestions: it is recommended to participate. The company has advanced manufacturing technology of precision parts, customers focus on the head, and has strong competitiveness in 3C market segment. In recent years, the company has gradually expanded to high value-added fields such as automobile, medical treatment, aerospace and so on. The initial price of new shares is low, and the initial PE is comparable and close to its peers. Considering the recent marginal recovery of the secondary market, it is recommended to participate in the subscription.
Risk factors: 1) risk of rising price of raw materials; 2) Outsourcing supplier management risk; 3) Risk of rising labor costs; 4) Market competition intensifies risks.
