Wuxi Zhenhua(605319) 光大证券·2024-06-24 03:02Investment Rating - The report initiates coverage on Wuxi Zhenhua with a "Buy" rating and sets a target price of RMB 23.96, corresponding to approximately 15x 2024E PE [3][10]. Core Viewpoints - Wuxi Zhenhua is an established stamping enterprise that has expanded its business scope and profitability through three main segments: traditional stamping and mold business, assembly business, and precision electroplating [22][55]. - The company is expected to benefit from the growth of new energy vehicles, with a projected CAGR of 20% in the new energy passenger vehicle stamping parts market from 2022 to 2026 [15][90]. - The assembly business, which is closely tied to SAIC Motor, is anticipated to continue growing as SAIC expands its overseas operations, contributing to stable revenue and profit growth [2][22]. - The newly added electroplating business is expected to enhance profitability, driven by stricter emissions regulations for fuel vehicles and rapid growth in hybrid vehicle sales [16][22]. Summary by Sections Business Overview - Wuxi Zhenhua, founded in 1989, has diversified into three core areas: traditional stamping and mold business, assembly business, and precision electroplating [22][55]. - The company has established stable partnerships with major automotive manufacturers, including SAIC and emerging players like Xiaomi and Li Auto [59][22]. Financial Performance - In 2023, the company reported a revenue of RMB 2.32 billion, a year-on-year increase of 32.7%, and a net profit of RMB 277 million, reflecting a 242.6% increase [62]. - The gross margin improved to 25.1%, driven by the recovery of raw material prices and the addition of high-margin electroplating business [62][86]. Profitability Forecast - The forecasted net profits for 2024E, 2025E, and 2026E are RMB 398 million, RMB 467 million, and RMB 519 million, respectively, indicating year-on-year growth rates of 44%, 17%, and 11% [3][10]. - The report anticipates that the assembly and electroplating businesses will further enhance overall profitability due to their higher gross margins compared to traditional stamping [86][22]. Market Dynamics - The stamping industry is characterized by low concentration and a customer-centric approach, with no single player holding more than 2% market share [71][22]. - The shift towards new energy vehicles is expected to increase the demand for stamping parts, as traditional automakers and new entrants seek to enhance their product offerings [90][91].