Key investment points:
The era of die casting is coming. Tesla took the lead in applying the integrated die-casting process on model y. at present, the front and rear bottom sectors can be die-cast into a large part respectively, realizing cost reduction and efficiency increase, rapid production expansion and operating profit margin surpassing the global mainstream auto enterprises. Affected by this, Weilai, Xiaopeng, ideal, Volvo and other “old and new” forces have joined hands with Wencan Group Co.Ltd(603348) , Guangdong Hongtu Technology (Holdings) Co.Ltd(002101) , Ningbo Tuopu Group Co.Ltd(601689) and other die-casting manufacturers to actively layout integrated die-casting. Some manufacturers have completed trial production and are about to implement mass production.
The improvement of concentration is the general trend, and the leading enterprises have greatly expanded their production. First, integrated die casting has strong capital and technical barriers in equipment, raw materials, molds and processes, and it is difficult for small and medium-sized enterprises to match in scale and R & D capacity; Secondly, the head listed companies have taken the lead in layout, binding customers and actively expanding production by taking advantage of financing advantages, laying a solid foundation for future growth. From 2019 to 2021, we estimate that the market share of the first six professional die-casting enterprises has increased from 12.3% to 16.3%, steadily increasing.
The profitability of the industry is expected to continue to improve, driving leading enterprises to enter the performance explosion period. 1) From a long-term perspective, the turnover rate of fixed assets in the industry continued to decline from 2016 to 2020, driving the depreciation / income ratio to rise year by year, and the gross profit margin continued to decline; In 2021, the turnover rate and depreciation / income ratio both ushered in inflection points. 2) In the short term, the increase of aluminum price in 2021 has significantly dragged down the gross profit margin (a year-on-year decrease of 6pct). With the transmission of cost pressure to downstream customers, the gross profit margin of 22q1 is + 2.7pct month on month; With the decline of high aluminum prices, the gross profit margin will be further improved. 3) From 2016 to 2021, the expense rate of the industry was relatively stable; Therefore, the continuous improvement of gross profit margin will be directly reflected in the increase of net profit margin. 4) The performance of leading companies is expected to explode with the addition of large-scale revenue driven by capacity expansion.
List of mainstream die casting listed companies: 1) products, customers and business highlights: Wencan Group Co.Ltd(603348) has the first mover advantage in body structural parts and takes the lead in the layout of integrated die casting Ikd Co.Ltd(600933) GM has a high market share of small and medium-sized parts, and Ningbo Xusheng Auto Technology Co.Ltd(603305) is deeply bound to Tesla. 2) Growth: from 2016 to 2021, the revenue side of the sector was weaker than the profit side, and the comprehensive performance of Ningbo Xusheng Auto Technology Co.Ltd(603305) and Nanjing Chervon Auto Precision Technology Co.Ltd(603982) was better. 3) Profitability: ① from 2016 to 2021, Ningbo Xusheng Auto Technology Co.Ltd(603305) , Ikd Co.Ltd(600933) gross profit margin decreased significantly. The former is related to Tesla‘s high proportion of revenue and a large decline in gross profit margin, while the latter is related to the expansion of large business; ② Jiangsu Rongtai Industry Co.Ltd(605133) and Nanjing Chervon Auto Precision Technology Co.Ltd(603982) have high expense rates, mainly due to their small scale; ③ From 2019 to 2021, Guangdong Hongtu Technology (Holdings) Co.Ltd(002101) the net profit margin deducted from non net profit increased continuously, mainly benefiting from the stable gross profit margin and the improvement of expense rate. 4) .
Investment suggestion: from 2022 to 2024, the net profit CAGR of Die Casting Sector (6 professional die casting companies) is 48%, corresponding to 23 times of PE in 22 years, and the valuation is relatively low. It is suggested to focus on Wencan Group Co.Ltd(603348) , Ningbo Xusheng Auto Technology Co.Ltd(603305) , Ikd Co.Ltd(600933) , Guangdong Hongtu Technology (Holdings) Co.Ltd(002101) , and Jiangsu Rongtai Industry Co.Ltd(605133) , Nanjing Chervon Auto Precision Technology Co.Ltd(603982) .
Risk tips: 1) the impact of the epidemic on automobile production is higher than expected, 2) the macroeconomic downturn leads to the weakening of automobile demand, 3) the rise of aluminum price is higher than expected, 4) the process or range of cost transmission to downstream customers is lower than expected, and 5) the improvement of fixed asset turnover is lower than expected.
