(Report Producer Analyst: Southwest ** Liu Yan).
A leading enterprise in the domestic wiring harness assembly industry, providing customers with one-stop service. The company is a high-tech enterprise with R&D, production and sales of various types of wire harness components and injection molding integrations as its main business, and its products are widely used in smart home appliances, industrial automation, POS machines and measuring scales, new energy vehicles, large printing machines, high-speed rail, medical equipment and other fields, with products covering more than 300 series and more than 3,000 models.
The company integrates mold workshop, injection molding workshop, wiring harness workshop and PCBA workshop, and can provide complex electronic assembly products including wiring harness, injection molding parts and PCBA, providing customers with one-stop solutions.
Based on innovative technology for a long time, the company has improved the technical content of products, continuously improved the market competitiveness of products and the trust of customers, and is at the leading level in the industry in terms of process technology, advanced production equipment technology and control experience.
It attaches great importance to product quality and emphasizes technological innovation as the core competitiveness.
The company has always adhered to the strategy of high-end market development, regarded product quality as the source of life of the enterprise, and firmly established a strict quality awareness. Since its establishment, it has continuously passed ISO9001 quality system certification, IAFT16949 automotive system certification and UL certification in the United States.
The product quality conforms to relevant industry standards and EU RoHS and REACH standards to ensure the reliability and consistency of its product quality, and meets the strict requirements of various application fields for electronic components in terms of precision, transmission efficiency, durability, anti-interference, flame retardancy, cold and heat resistance, oil resistance, flexibility and many other aspects.
As of June 30, 2023, the company has 61 utility model patents, 1 invention patent and 2 software copyrights.
1.1. The chairman of the board of directors and his family members are the actual controllers, and the equity is relatively concentrated
The actual controller, the chairman of the board of directors and his family members hold 63 shares5%。The controlling shareholders and actual controllers of the company are Zhou Haoliang, Gao Jianzhen and Zhou Weidi, Zhou Haoliang and Gao Jianzhen are husband and wife, and Zhou Weidi is the son of Zhou Haoliang and Gao Jianzhen.
As of September 30, 2023, Chairman Zhou Haoliang directly held 423% of the shares, and indirectly holds 31% stake; Gao Jianzhen directly holds 123% of the shares, and indirectly holds 31% of the shares, through Zibo Weimao Investment Partnership (Limited Partnership) to hold the company 03% stake; Zhou Weidi directly holds the company's 25% of the shares, and the three of them together hold 63 of the company5% stake.
1.2. The company's products are widely used in a wide range of fields, and constantly innovate and enrich the product structure
The company's products are widely used in a wide range of fields, and the product structure is constantly enriched according to downstream needs. The company's main products are divided into two categories according to their functions: wire harness components and injection molding integrations.
The company's wiring harness components and injection molding integrated parts products are divided into smart home appliance components, industrial automation components, POS machine and metering scale wiring harness components, automotive new energy vehicle components, large printing machine components, high-speed rail components, water purification and environmental protection components and medical equipment components.
The company conforms to the market trend, according to the preferences of different downstream industries for functions, and constantly enriches the overall structure of products to meet the market needs of different consumers.
1.3 The scale of revenue has gradually rebounded, and the export revenue has increased rapidly
Operating income was affected by the epidemic, and subsequent profitability gradually recovered. In 2022, affected by the new crown epidemic, Shanghai, where the company is located, has been under global static management for several months, the company's production line has been suspended for a time, and most of the company's employees were infected with the new crown in December, which greatly affected the production line production and order delivery, and the company's operating income decreased by 9% year-on-year0%, net profit attributable to the parent increased by 1 year-on-year4%。In the first three quarters of 2023, the company has returned to normal operations, with profitability rebounding significantly, and operating income increasing by 17 year-on-year8%, and the net profit attributable to the parent increased by 7 year-on-year6%。
Wiring harness components are the company's main products, and new energy vehicle projects are gradually starting to increase. From 2019 to the first half of 2023, the revenue of wiring harness components accounted for more than 50%, and in August 2023, the company received a fixed-point notice for mass production parts from Joyson Group New Energy Vehicle System Research Institute, providing high-voltage wiring harnesses for a leading domestic new energy vehicle customer, and the project will start mass production in the second half of 2023, with a life cycle of about 5 years and a total amount of about 2 in the whole life cycle600 million yuan, it is expected that the company's wiring harness component product revenue proportion will further increase in the next five years. In 2022, several injection molding integration products developed by the company will be gradually mass-produced, and at the same time, the full opening of the epidemic abroad will increase social demand, and the sales of electric irons will increase significantly, resulting in a year-on-year increase in the revenue scale of injection molding integrations, and the proportion will gradually increase.
China is the company's largest market, and the export revenue has increased rapidly. From 2019 to the first half of 2023, the company's domestic sales revenue accounted for more than 50%, and China is still the company's largest market1%, the proportion is gradually rising.
The gross profit margin fluctuated in a small range, and the expense ratio decreased during the period. From 2019 to the first three quarters of 2023, affected by the diversified demand of the downstream market and the rapid change of categories, the company has more product categories, new products replace old products with rapid changes, and the gross profit margin fluctuates around 30%. In 2022, the company's gross profit margin will decrease by 2 percent year-on-year8pp, mainly due to higher labor costs and a significant increase in depreciation and amortization expenses following the completion and acceptance of the new plant in June 2021. In the same year, the company received a subsidy of 5 million yuan for the listing of enterprises, and the non-operating income increased year-on-year, and the net profit margin increased by 2 year-on-year0pp。The company's expense ratio remained at 117%-14.In the 9% range, in the first three quarters of 2023, the company's interest income from cash management from its own funds increased year-on-year, resulting in a decrease in the financial expense ratio and the overall expense ratio.
2.1 New energy vehicles drive the growth of automotive wiring harnesses, and the intelligence of home appliances provides increments for injection molded products
Automotive wiring harness is an important component connecting various unit modules of the car, and it is a customized product. The automotive wiring harness is the main body of the network of the automotive circuit, which organically connects the first-class control components with the automotive control unit, electrical and electronic actuator unit, and electrical devices to form a complete automotive electrical electronic control system.
Automotive wiring harness is mainly composed of wires, terminals, connectors and sheaths, etc., which are made of copper stamped contact terminals (connectors) and wires and cables after crimping, plastic pressure insulators or metal shells, etc., to form components connecting circuits with wire harnesses.
Automotive wiring harness products are customized products, and different vehicle manufacturers and their different models have different design solutions and quality standards.
Automotive wiring harnesses can be classified by location and function. According to the location, we can divide it into: front cabin wiring harness assembly, engine wiring harness assembly, transmission wiring harness assembly, instrument wiring harness assembly, indoor wiring harness assembly, door wiring harness assembly (four different doors), roof wiring harness assembly, rear trunk wiring harness assembly, battery positive and negative wiring harness assembly, airbag wiring harness assembly and other parts.
The upstream and downstream of automotive wiring harnesses are closely connected, and the demand for high-voltage wiring harnesses in new energy vehicles is rising rapidly. The commonly used raw materials in the upstream of automotive wiring harnesses include copper wires, aluminum wires, PVC plastic pipes, heat shrinkable sleeves, etc. Downstream of automotive wiring harnesses are widely used in various types of automobiles, including passenger cars, commercial vehicles, special vehicles, etc. Automotive wiring harnesses connect various electrical devices and sensors of the car, such as engine controllers, brake systems, air conditioning systems, audio systems, etc. With the rapid development of new energy vehicles, the demand for high-voltage wiring harnesses in new energy vehicles is also rising rapidly.
The scale of China's automotive wiring harness industry has grown steadily, and the high-voltage wiring harness market has strong development potential. According to the data of Zhiyanzhan Industry Research Institute, from 2016 to 2022, the total market size of China's automotive wiring harness industry has increased from the initial 590500 million yuan expanded to 814600 million yuan, CAGR reached 55%。Among them, the proportion of the automotive high-voltage wiring harness market in the total automotive wiring harness market has gradually increased, from 21% to 17 in 20224% to 141400 million yuan, a year-on-year increase of 596%, showing the rapid growth and development potential of the automotive high-voltage wiring harness market.
New energy vehicles have become an important driving force for the development of automotive wiring harnesses, and the value of wiring harnesses in new energy vehicles is higher than that of traditional fuel vehicles. Due to the continuous growth of new energy vehicle production, it has become one of the important driving forces for the future development of China's automotive wiring harness industry.
According to the data of the National Bureau of Statistics, from 2016 to 2022, China's new energy vehicle production increased from 4550,000 units increased to 72190,000 units, with a compound annualized growth rate of 585%；According to the data of the China Association of Automobile Manufacturers, China's new energy vehicle sales increased by 5070,000 units increased to 68870,000 units, with a compound annualized growth rate of 545%。
Compared with traditional fuel vehicles, the new energy vehicle system includes low-voltage wiring harness and high-voltage wiring harness, and the demand value of wiring harness is greater, and the market scale of China's automotive wiring harness will continue to expand as the penetration rate of new energy vehicles continues to increase in the future.
Injection molding products are widely used, and the company's injection molding integrated parts are concentrated in the intelligent small household appliance industry.
Injection molding products refer to the general term of various products that are heated and plasticized and melted by injection molding machine, and then injected into the cavity of the molding mold, cooled and cooled, released after melt curing, and injection molding by injection molding machine.
Injection molded products have the characteristics of high precision, lightweight, miniaturization and miniaturization, meet the requirements of industrial equipment parts, have good mechanical, mechanical properties and dimensional stability and other advantages, in logistics, packaging, communications, aerospace, military industry, machinery, automobiles, consumer electronics and medical equipment and other fields have been widely used in the field of replacing some high-precision metal parts. The downstream of the company's injection molding integrated parts products are mainly concentrated in the smart small household appliance industry.
The rising demand for intelligent consumer automation has driven the rapid development of the injection molding integration segment.
At this stage, the degree of intelligence of household appliances is gradually deepening, the products are gradually enriched, and the market penetration rate is getting higher and higher. At the same time, with the improvement of the income level of domestic consumers, consumers' brand awareness is getting stronger and stronger, and the requirements for product quality and quality are gradually improving, which further stimulates the consumption of smart home appliances, and the industry scale continues to grow.
According to iiMedia Consulting data, the scale of China's smart small household appliances market is showing a continuous development trend, with a market size of 155.7 billion yuan in 2021 and is expected to reach 192.4 billion yuan in 2023. In the future, consumers' demand for smart small household appliances will continue to expand, which will drive the rapid development of the company's injection molding integration segment.
2.2. The automotive wiring harness market presents an oligopoly competition pattern, and foreign-funded enterprises occupy most of the market
The automotive wiring harness market presents an oligopoly competition pattern, and the vast majority of the market belongs to foreign-funded enterprises. Automobile manufacturers, especially global automobile brands, usually implement high-standard and strict business management, and the business system is relatively closed.
A small number of foreign-funded and joint-venture automotive wiring harness enterprises have occupied the vast majority of the market share for a long time, forming an oligopoly competition situation in the automotive wiring harness industry, mainly represented by well-known auto parts companies and their joint ventures such as Reini, De Kosmeer and Coroplast in Germany, Yazaki and Sumitomo Electric in Japan, as well as Lear and Aptiv in the United States.
According to the data of Huajing Industry Research Institute, in 2021, the CR3 of global automotive wiring harness companies will be 71%, respectively, Yazaki, Sumitomo and Aptiv, with a market share of %.
There are many downstream fields of electronic wiring harnesses, and there are no competitors with overlapping major customers.
Electronic wiring harness serves many downstream fields, listed or unlisted public companies do not exist with the company's main customers overlap the main production harness products of the company, the company's main competitors are Honglida plastic products *** and hand new leaf (h.).k.）limited。And select Xingrui Technology, Zhixin Electronics, Shenglan Co., Ltd., Haineng Industry Co., Ltd., and Huguang Co., Ltd., whose main business is wire harness components and connectors, as comparable companies.
3.1. The automotive wiring harness market has been cultivated for many years, and new energy head car company projects have been added
The company has been working in the automotive field for many years, and has mainly carried out direct cooperation with first-class manufacturers of domestic and foreign OEMs.
In recent years, it has developed projects such as Mercedes-Benz C-class taillights, Chery automobile sunroof wiring harness, ZEEKR 001 automatic induction door electronic assembly, Changan Automobile's new generation powertrain HE15 ME15 electronic vacuum pump and other projects, covering all kinds of high and low voltage wiring harness products.
The company conforms to the preferences of downstream OEMs for different functions, and constantly innovates and enriches the overall structure of products every year to meet different market needs.
Based on technological innovation for a long time, the company has been engaged in the research, development, production and technical services of a variety of high-tech and related products, and continuously improved the technical content of products, thereby improving the market competitiveness of products and improving customer trust.
Domestic spare parts manufacturers and car companies have a high degree of synchronization in development, and the demand for domestic substitution is becoming increasingly strong. At present, the rapid update, release and technology iteration of new energy vehicles is bound to put forward higher requirements for the R&D capabilities and response speed of spare parts manufacturers.
In recent years, more domestic customers in the automotive field have begun to seek cooperation with the company, and domestic auto parts manufacturers have gradually broken the technical barriers of foreign capital, occupied the market with faster response speed and cost control capabilities, and quickly kept up with the demand and development of new energy vehicle companies. The company is widely favored by car companies with localization needs by virtue of its cooperation experience with foreign OEMs, its technical ability to compete with foreign counterparts, and its good experience in cost control and localization.
The company vigorously invests in the field of new energy vehicles to meet the needs of downstream customers. The company's R&D focus is in the field of new energy, mainly including the research and development of new energy high-voltage wiring harnesses, charging guns and plastic components. With the development of new energy vehicles, the requirements for connection and terminal crimping in new energy high-voltage wiring harnesses are getting higher and higher, and the company has been following market trends for in-depth research and development; In terms of charging guns and plastic components, as the demand for charging voltage for new energy vehicles is getting higher and higher, the company has gradually improved and upgraded from the aspects of components, chips, PDUs, heat dissipation, and wire weight to meet the needs of customers. At present, the research projects include the company's charging pile module project, covering different technical routes such as 400V, 800V, and liquid-cooled charging piles.
In recent years, the company has implemented an integrated and component-based strategy to form differentiated competition with other wiring harness companies. In recent years, the company has met the needs of customers in different application fields through customized services in the mode of small batches and multiple varieties, so it has formed a certain differentiation from most wire harness companies. Some large-scale wire harness factories adopt a large-scale, high-output value production model, usually producing fewer types of products, relatively single processes, and relatively low profit margins.
Compared with some companies in the same industry, the company has more self-production links and more complete production processes, with wires, wiring harnesses, molds, injection molding, PCBA, component assembly and other technical processes. At present, the company mainly cooperates directly with domestic and foreign OEMs Tier 1 manufacturers, who have high requirements for quality and technology, and the company can better meet the different needs of these customers, providing a full range of services from product design, research and development, and production, and at the same time providing them with localization and cost reduction solutions.
Linking the leading new energy car companies, the cooperation project has begun to be supplied in batches. In August 2023, the company received a fixed-point notice for mass production parts from Joyson Qunying (Nanjing) New Energy Vehicle System Research Institute, and the company provided high-voltage wiring harnesses in air conditioning compressors for a leading domestic new energy vehicle customer project.
The test has been completed in the early stage of the project, and the batch has gradually begun, and it is currently in the stage of capacity ramp-up. The life cycle of the project is about 5 years, and the total amount of the whole life cycle is about 2600 million yuan. Taking this project as a starting point, the company is also striving to cooperate with customers in other wire harness and injection molding component projects, with the rapid development of the customer in the domestic and foreign markets, the future may bring more large-scale high-quality projects to the company.
3.2. Long-term cooperation with customers in the field of home appliances, and all-round service customers in the field of industrial automation
The company has long-term cooperation with customers in the field of home appliances to provide them with supporting services.
The company is the world's small household appliance giant Cyber Group's A-class business, mainly for its high-end brands such as Rowenta, Tefal, Calor, Krups, WMF and other high-end brands to provide injection molding components and wiring harness components for electric irons, coffee machines, food processors.
Taking the highly integrated garment iron assembly as an example, the product includes the plastic bottom plate of the iron, the knob assembly, the steam line, the power cord, the PCBA and the control panel assembly, etc., which almost includes the core electronic components of the entire electric iron.
Another major customer of the company's home appliance industry is the German Vorwerk, the company, as the core electronic supplier, for its first sweeping robot, tea drinking machine, TM cooking machine ("Xiaomei") in the wiring harness components, breaking the long-term monopoly of overseas merchants on the above foreign brands.
Some projects of smart home appliances have been gradually mass-produced, and the strategy of integration and componentization has been continuously promoted.
Another focus of the company's R&D is on home appliances, the company is keen on the research and development of new projects, and some projects have been gradually mass-produced, such as Vorwerk's sweeping robot project, Cyber's garment iron assembly project, etc., benefiting from the blowout outbreak of social demand in the post-epidemic era, the company's electric iron component business continues to grow rapidly.
The company continues to promote integration in the field of smart home appliances. The componentization strategy directly produces and assembles multiple parts required by customers and sells them as a whole, and the unit price of products has been greatly increased.
Cooperate with industrial automation customers in an all-round way to develop and produce integrated component products.
In terms of industry, benefiting from the high energy level after the Russia-Ukraine war, Europe began to vigorously promote heat pumps and solar energy to replace traditional natural gas energy.
The company has carried out a full range of cooperation with Viessmann in Germany in heat pumps, solar energy and energy storage systems, and has developed and produced harnesses and integrated module products for its factories in Germany, France, China and Vietnam. Among the research projects, the company and Viessmann of Germany have two projects to achieve small-scale mass production, and several new projects are also under development.
3.2. The new plant has achieved the expected benefits and improved the company's production capacity and intelligent level
The company's public offering raised net funds of 1900 million yuan. In February 2022, the company issued 205960,000 shares (excluding shares issued by exercising the over-allotment option), issued by public offering, issue ** is 90 yuan shares, the total amount of funds raised is 1900 million yuan, and the actual net amount of funds raised was 1700 million yuan, the amount of funds raised by the company due to the exercise of the over-allotment option is 0200 million yuan, the final net amount of funds raised in this issuance is 1900 million yuan.
The new plant project has reached the expected benefits, and the company's production capacity and intelligent level have been improved. As of August 2023, the progress of the company's fund-raising project "new plant project" has reached 999%, and by the end of 2022 to achieve the expected benefits, through the construction of new plants and the introduction of relevant cash equipment, expand the company's existing production capacity, create an intelligent and automated production model, and gradually realize the transformation of the production process from semi-automation to full automation.
4.1 Profit**
Key assumptions:
Hypothesis 1:The company's wiring harness products have a wide range of application scenarios, and in recent years, the company has implemented an integrated and component-based strategy to meet the needs of customers in different application fields through customized services in a small batch and multi-variety mode, so it has formed a certain differentiation from most wiring harness companies. With the rapid growth of demand in downstream new energy vehicles and other fields, the company's wiring harness revenue is expected to increase steadily. We estimate that from 2023 to 2025, the company's wiring harness assembly sales volume will be about 1900 2200 25 million pieces, and the sales** will be about 69/7.3/7.7 yuan, gross profit margin is about 30% 30% 30%.
Hypothesis 2:The company's plastic component products have a wide range of application scenarios, and the company provides customers with overall solutions with a high degree of binding with customers. With the rapid growth of demand in the fields of downstream new energy and home appliances, the company's plastic component revenue is expected to increase steadily. We estimate that from 2023 to 2025, the company's injection molded component product sales will be about 940 1100 13.6 million pieces, and the sales** will be about 83/9.0/9.7 yuan, gross profit margin is about 30% 30% 30%.
Based on the above assumptions, the revenue and cost of our ** company by business from 2023 to 2025 are as follows:
4.2 Relative Valuation
Based on the main products sold by the company, we selected Xingrui Technology, Huguang Co., Ltd. and Yongding Technology as comparable companies.
From the perspective of PE, in 23-25 years, the average valuation of the three companies is 30 31 30 times.
It is estimated that the company's operating income from 2023 to 2025 will be 24/2.9/3.500 million yuan, yoy is 179%/21.6%/22.1%；It is estimated that the company's net profit attributable to the parent company from 2023 to 2025 will be 412/50.5/60.$9 million with a CAGR of 205%, corresponding to PE is 25 21 17 times.
Considering that the average valuation of comparable companies in 2024 is 31 times, the company's performance is expected to grow steadily due to sufficient new projects in hand and continuous investment in new energy vehicles and other fields; At the same time, considering that the liquidity gap between different markets is gradually narrowing, we give the company 25x PE in 2024, corresponding to a target price of 15$8.
Market competition risk. If the company can not continue to improve in technological innovation, product quality and quality, market development, etc., it will lead to the company being in a disadvantageous position in the increasingly fierce market competition, which may have an adverse impact on the company's performance.
The actual controller improperly controls the risk. If the actual controller of the company and its family members use their controlling position over the company to improperly control the company's development strategy, production and operation decisions, foreign investment, personnel appointments and dismissals, profit distribution and other major matters, it may damage the interests of the company and minority shareholders.
Risks of the company's internal controls. The company's various systems are constantly improving, but there may still be risks of non-standard governance and ineffective implementation of relevant internal control systems.
Major customers are relatively concentrated in risk. The company's main customers are highly concentrated. If the company's major customers have insufficient orders in a short period of time, large changes in business conditions or untimely payment collection, it may have an adverse impact on the company's operating conditions and performance.
Risk of fluctuations in raw materials**. In the future, if the copper price and plastic particles fluctuate significantly, or the company's settlement method with customers and merchants on the copper price difference changes, it will have an adverse impact on the company's performance.
Exchange rate fluctuation risk. With the growth of the scale of overseas sales business, if the exchange rate fluctuates greatly, it may have a certain impact on the company's operating performance.
Product R&D Risks. Because the company often needs a certain period of time from product research and development to final industrial production, and there may be technical uncertainties, the company is faced with various uncertainties and even the risk of R&D failure at all stages of research, development, and trial production of new products.
Rising labour costs risk. Rising labor costs have become a common phenomenon in China's economic development. If the company is unable to cope with the increase in labor costs, it will adversely affect the company's gross profit margin.
Product quality control risks. If there are major quality problems in the company's products in the future, the company may face the risk of compensation, which will adversely affect the company's business operations.
Management risks arising from the expansion of business scale. If the company's organizational model, management system and management personnel fail to adapt to changes in the company's internal and external environment, it may adversely affect the company's sustainable development.
The risk that the new capacity will not be absorbed. If the company's downstream customer demand is lower than expected or the company's market development is unfavorable, it may lead to the risk that the raised funds investment project will not be able to digest the production capacity, which will adversely affect the company's performance.
Risks involved in litigation. Huaxin Construction and the company have a construction contract dispute. At present, this case still needs to be further advanced in the work of supplementary quality appraisal and project cost appraisal, and the case is still under trial. Based on the worst-case scenario, the company will pay a total of 2,991 for the remaining project costs, interest and attorney's fees1.75 million yuan, the company will increase fixed assets by 1080480,000 yuan, with an annual increase in depreciation of about 510,000 yuan, reducing net profit by nearly 440,000 yuan, which has little impact on the company's profits.
Risk of changes in tax incentives. In 2020, the company has re-applied for recognition as a high-tech enterprise, and has obtained the certificate number: GR202031006543. In addition, since 2016, the company has enjoyed the tax policy of value-added tax exemption and credit for production-oriented export enterprises, the additional deduction of R&D expenses and the preferential enterprise income tax for the employment of disabled people. If the above-mentioned tax policy of the state changes, it will have an adverse impact on the company's net profit.
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