Wuxi Zhenhua(SH:605319) EBSCN·2024-06-24 02:32Investment Rating - The report assigns a "Buy" rating to the company with a target price of 23.96 CNY, corresponding to a 15x PE for 2024E [92]. Core Viewpoints - The company is actively transforming towards the new energy sector, with significant growth opportunities arising from the development of electric vehicles, particularly in the metal stamping parts market, which is expected to reach 253.1 billion CNY by 2026, growing at a CAGR of 2.3% from 2022 to 2026. The new energy vehicle segment is projected to grow at a much higher CAGR of 20.0%, reaching 105.8 billion CNY by 2026 [2][65]. - The company has established a diversified business model focusing on three core areas: traditional stamping and mold business, assembly processing, and precision electroplating, which collectively enhance its operational capabilities [25][28]. Summary by Sections Financial Forecast and Valuation - Revenue is projected to grow from 1,747 million CNY in 2022 to 4,260 million CNY by 2026, with growth rates of 10.42%, 32.65%, 28.27%, 27.10%, and 12.77% respectively [3][86]. - Net profit is expected to increase from 81 million CNY in 2022 to 519 million CNY in 2026, with significant growth rates, particularly a 242.63% increase in 2023 [3][86]. - The company’s EPS is forecasted to rise from 0.40 CNY in 2022 to 2.07 CNY in 2026, indicating strong profitability growth [3][86]. - The P/E ratio is projected to decrease from 46 in 2022 to 9 in 2026, reflecting improved earnings and valuation [3][86]. Business Segments - The stamping parts business is expected to see revenue growth driven by new models from key clients like Xiaomi and Li Auto, with projected revenues of 1.8 billion CNY, 2.5 billion CNY, and 2.9 billion CNY for 2024E, 2025E, and 2026E respectively [6]. - The assembly processing business is anticipated to grow alongside SAIC's export volumes, with revenues reaching 6.5 million CNY, 7.0 million CNY, and 7.4 million CNY in the same forecast period [6]. - The electroplating business is projected to generate revenues of 1.75 million CNY, 1.94 million CNY, and 2.13 million CNY for 2024E, 2025E, and 2026E, maintaining a high gross margin of around 78% [6]. Market Dynamics - The company is well-positioned to benefit from the increasing demand for new energy vehicles, as traditional automakers and new entrants like Xiaomi have not yet established fixed supply chains, presenting opportunities for the company [2][36]. - The competitive landscape in the stamping parts industry is fragmented, with no single player holding more than 2% market share, allowing for growth potential as the market evolves [68]. Strategic Initiatives - The company has expanded its production capacity across multiple locations, including Wuxi, Zhengzhou, Wuhan, Ningde, and Shanghai, to better serve both traditional and new energy vehicle manufacturers [11][43]. - The acquisition of Wuxi Kaixiang has enabled the company to enter the precision electroplating market, enhancing its product offerings and profitability [76][77].