\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 87 Anhui Zhongding Sealing Parts Co.Ltd(000887) )
Key investment points
Leading automobile non tire rubber parts, extended M & A, extended industrial chain
Founded in 1980, the company’s traditional main business is the R & D, production and manufacturing of seals and special rubber products, which are widely used in automobile, engineering machinery, petrochemical, railway, ship and other fields. In recent years, the company has formed business systems such as air suspension system, lightweight chassis system, fluid management system and sealing system through multiple extension mergers and acquisitions (German KACO, American Cooper, German wegu, AMK, TFH, Sichuan WANGJIN, etc.), and is in a leading position in these segments. The company ranked 13th in the global ranking of non tire rubber products in 2021 and first in China. It is a leading enterprise in China’s non tire rubber products industry. The company absorbed overseas technology and accelerated the implementation of production capacity in China, resulting in steady growth in performance. The revenue increased from 5.040 billion yuan in 2014 to 12.577 billion yuan in 2021, with a CAGR of 13.95%, and the corresponding attributable net profit increased from 567 million yuan to 965 million yuan, with a CAGR of 7.91%.
Air suspension system: China’s production capacity has landed, benefiting from the improvement of permeability
The German AMK acquired by the company in 2016 is one of the top three high-end suppliers of air suspension system in the world. Its core products, air suspension system, motor and electronic control system, have high technical barriers and have been deeply cultivated in the industry for more than 20 years. AMK supports the world’s top host manufacturers such as Jaguar Land Rover, Volvo, Audi, Mercedes Benz and Baoma. China’s air suspension market is in its infancy. After the acquisition of AMK, the company accelerated the improvement of passenger car air suspension performance and supply chain system, and accelerated the localization process of air suspension production. In 2020, AMK China’s motor production line was launched, and the local assembly line of air supply unit was launched in 2021, and has obtained orders from Weilai, Dongfeng lantu and other customers. In the past, the air suspension system was basically the standard configuration of high-end luxury cars. With the continuous decline of the localization cost of air suspension and the comfort requirements of new energy vehicles, the air suspension system is moving from high-end to popularization, and the penetration rate is expected to continue to increase. As a leading enterprise, the company has industrial chain advantages and product bargaining power, and is expected to benefit from the market volume. Since 2020, the company’s air suspension system business has obtained a full life cycle order of 3.595 billion yuan, with sufficient orders on hand.
Lightweight: ball joint hinge faucet, new product development is the focus
Automobile lightweight has become the development trend of the industry, especially the chassis lightweight has higher weight reduction benefits. The company complies with the development trend of the industry and vigorously develops chassis lightweight system assembly products. In 2015, the company acquired wegu from Germany to cut into the field of high-end chassis damping. In 2019, the company acquired Sichuan WANGJIN. Its core product is ball joint hinge assembly, which is the core safety component and performance component of chassis system. The company’s lightweight products include shock-absorbing rubber parts, and the control arm, swing arm, ball joint hinge, etc. in August 2021, the company changed the purpose of raising funds and invested in the lightweight automobile chassis parts business such as control arm, steering knuckle and connecting rod. With the continuous enrichment of products, the company obtained orders from traditional main engine plants such as Mercedes Benz, Chang’an and GAC, as well as Byd Company Limited(002594) and other new energy head enterprises. In 2021, the young quantitative business achieved a revenue of 789 million yuan, a year-on-year increase of 78.78%. Since 2021, the company’s air suspension system business has obtained a full life cycle order of 8.261 billion yuan, and the lightweight business is expected to usher in a period of rapid growth.
Fluid pipeline system: promote the use of new energy vehicles and enhance the value of single vehicles
The German TFH acquired by the company in 2017 is an excellent supplier of engine and new energy vehicle battery thermal management pipeline assembly products. It has its own patented exclusive production technology, createube process and the core technology of TPV hose and nylon pipe, ranking the top two in the world in its subdivided field. On the one hand, the company accelerates the localization process of TFH in China (Tesco Anhui was established and began to expand the Chinese market in 2020), on the other hand, it vigorously promotes the thermal management pipeline system assembly business of new energy vehicles. At present, it has provided supporting facilities for new energy vehicle platforms such as BMW, Volvo, Audi, Volkswagen, Geely, Xiaopeng and ideal. As the requirements of new energy vehicle battery module for temperature control are much higher than those of traditional vehicles, the single vehicle value of the company’s fluid management products has increased from about 300 yuan on traditional vehicles to nearly 1000 yuan on new energy vehicles, and the added new energy vehicles have reached about 1500 yuan. With the expansion of new energy vehicles and the improvement of single vehicle value, the business of fluid pipeline system will maintain steady growth.
Profit forecast
We are optimistic about the steady growth of the company’s traditional business and the flowering of supporting products of new energy vehicles. It is predicted that the net profit attributable to the parent company from 2022 to 2024 will be 1.153 billion yuan, 1.330 billion yuan and 1.523 billion yuan respectively, and the EPS will be 0.88, 1.01 and 1.16 yuan respectively. The corresponding PE of the current stock price will be 16, 14 and 12 times respectively. It will be covered for the first time and given a “recommended” investment rating.
Risk tips
Macroeconomic downside risk, the risk that the global automobile sales volume is lower than expected, the risk that the company’s products and customer expansion are lower than expected, the risk that the company’s order acquisition and execution are lower than expected, the risk of exchange rate fluctuation, the risk of rising raw material prices, the risk of goodwill impairment, the risk of repeated covid-19 epidemic, etc.
