Anhui Zhongding Sealing Parts Co.Ltd(000887) In-depth report on the company: Anhui Zhongding Sealing Parts Co.Ltd(000887) :Air suspension + thermal management + lightweighting all power, intelligent chassis leading to open the second growth curve

Anhui Zhongding Sealing Parts Co.Ltd(000887) ( Anhui Zhongding Sealing Parts Co.Ltd(000887) )

Non-tire rubber leader, business radius continues to extend. The company is the first in China and the world’s leading non-tire rubber products leader in 2021, with the traditional business of automotive seals. Since then, it has expanded to rubber shock absorbers, lightweight components, thermal management systems, air suspensions and other fields through outward M&A: the company acquired Tianjin Feilong Rubber Products Co. in 2010, KACO, a century-old company in Germany, in 2014, WEGU in Germany and FM in France in 2015, AMK in Germany in 2016, and in 2021 Bridgestone vibration damping rubber business in 2021. The company quickly cut into the three fast-growing fields of air suspension, thermal management and lightweighting through overseas mergers and acquisitions of high-quality enterprises, and with the successful implementation of localization, the performance is expected to continue to improve.

Air suspension: The trend of automotive intelligent electric drives the penetration of air suspension, and the company has received a total of 6.75 billion yuan of fixed points since 2020. Compared with traditional suspension, air suspension has the characteristics of improving vehicle comfort and handling, and at the same time can meet the requirements of light weight and intelligence of electric vehicles. As the localization process of air suspension advances, we expect that the market size of China’s passenger car air suspension is expected to reach 28.8 billion yuan in 2025, with a compound annual growth rate of about 52% from 2022 to 2025. The company acquired the air suspension system supplier AMK of Germany for 130 million euros in 2016, mastering the core technology of air suspension system components, and has since started mass production of air suspension systems, becoming a major supplier of global air supply units, and in 2018 the company established AMK China subsidiary Anhui Amico in China to promote the layout of air suspension localization, and since 2020 the company has received bookings amounting to 6.75 billion yuan Since 2020, the company has received 6.75 billion yuan of orders, including 1.29 billion yuan of orders for overseas projects and 5.46 billion yuan of orders for Chinese projects. The company is one of the few Chinese manufacturers who master the core technology of air suspension system, and is expected to fully benefit from the increase of air suspension product penetration in the future.

Thermal management: electrification drives the increase in the value of thermal management system per vehicle, and the company has received a total of 5.98 billion yuan in bookings since 2020. The main role of the thermal management system for fuel vehicles is cooling (heating is generated by the residual heat of the engine), and the value volume of a single vehicle is 2,000 yuan; the thermal management system for pure electric vehicles takes into account both cooling and heating (the heat generated by the motor is limited), and the value volume of a single vehicle reaches 6,000 yuan; hybrid models have two systems of engine and motor, and the highest unit price of thermal management reaches 7,000 yuan. The company’s thermal management products are mainly cooling pipes, and in 2021, the value of single vehicle in pure electric, hybrid and fuel vehicles is about 800, 1,400 and 300 yuan respectively, according to our calculations, the market size of thermal management cooling pipes will increase from 10.07 billion yuan to 32.58 billion yuan in 20212030, with a compound annual growth rate of 14%. Since 2020, the company has received a total of 5.98 billion yuan of orders for thermal management projects, including 208 million yuan of orders for overseas projects and 5.771 billion yuan of orders for Chinese projects. The company has received a total of 5.9 billion yuan of orders for thermal management projects since 2020, including 208 million yuan for overseas projects and 5.771 billion yuan for Chinese projects. With electrification in full swing, the company, as a core thermal management piping company, is expected to continue to benefit from the high boom of new energy vehicles.

Lightweighting: policy to promote the development of automotive lightweighting, the company has received a cumulative total of 10.9 billion yuan of fixed points since 2020. Lightweighting of auto parts is one of the most effective methods for energy saving and emission reduction of automobiles, and is also one of the key areas of policy support. In 2020, the Automotive Industry Association released the “Energy Saving and New Energy Vehicle Technology Roadmap 2.0″, which requires a 25% reduction in the lightweight coefficient of fuel passenger cars and a 35% reduction in the lightweight coefficient of pure electric passenger cars by 2035. Aluminum is the preferred material for lightweighting. According to our estimation, the market size of chassis and suspension aluminum will increase from 3 billion yuan to 42.1 billion yuan in 20212030, with a compound annual growth rate of 34%. The company acquired 100% stake in Germany WEGU in 2015, WEGU is the core enterprise of anti-vibration and noise damping in Europe, since then the company set up a professional lightweight team and started to layout the field of intelligent chassis lightweight, launching advanced chassis lightweight parts such as forged aluminum control arms on the basis of rubber noise reduction and vibration damping business, and in 2019 the company acquired Sichuan Wangjin to obtain the core technology of ball hinge production. The company has previously received orders from customers such as Byd Company Limited(002594) and General Motors, and has received a total of 10.928 billion yuan in cumulative orders for projects since 2020, including orders for a total of 6.595 billion yuan in 2022 for chassis lightweighting assembly projects for Chinese head independent brand OEMs. Electric cars are heavier than fuel cars and have “mileage anxiety”, so they have higher requirements for automotive lightweighting. The company has mastered the production technology of forged aluminum control arms, ball hinges and other core products, and is expected to continue to benefit from the industry’s high growth in the future.

Profit forecast and investment rating: The company is the leading non-tire rubber leader in China. The traditional business (rubber and sealing) brings stability and certainty to the company, while the incremental business (air suspension, lightweighting and thermal management) brings growth space and points to the company. We expect the company’s net profit from 20222024 to be 1.057, 1.428 and 1.730 billion yuan, corresponding to a PE of 19/14/11 times, respectively. Referring to the valuation level of comparable companies, we give the company 25 times target PE in 2023, corresponding to a market value of 35.7 billion yuan, and give it a “buy” rating for the first time.

Risk factors: lower than expected auto sales, increased industry competition, raw material price fluctuations, goodwill impairment.

- Advertisment -