Xiantong Stock(SH:603239) Huafu Securities·2024-09-27 10:00Investment Rating - The report gives a "Buy" rating for Zhejiang Xiantong, marking its first coverage [12][5]. Core Views - Zhejiang Xiantong is a leading domestic manufacturer of automotive sealing strips, specializing in products and deeply engaged in the industry. The company has shown significant revenue and profit growth, with a focus on cost control and improving customer structure [2][3][43]. - The domestic market for automotive sealing strips is experiencing a clear trend of domestic substitution, with the competitive landscape being reshaped, which is expected to enhance market share for the company [3][10]. - The company has two key products, the European-style guide groove and frameless sealing strips, which are anticipated to drive new profit growth [3][11]. Summary by Sections 1. Company Overview - Zhejiang Xiantong was established in 1994 and has been engaged in the automotive sealing strip industry for nearly 30 years. The company went public on the Shanghai Stock Exchange in 2016 and achieved a revenue of 1.066 billion yuan in 2023, a year-on-year increase of 14% [2][43]. - The company’s core products, rubber and plastic sealing strips, account for 96.83% of its revenue [2]. 2. Market Analysis - The market for automotive sealing strips in China is estimated to be around 17-18 billion yuan. Domestic manufacturers have a strong cost advantage, which is expected to accelerate the domestic substitution trend [3][10]. - The company has a significant first-mover advantage in the domestic sealing strip industry, which positions it well for future market share growth [3]. 3. Cost Control and Product Development - The company has a notable advantage in cost control, with a product quality rate exceeding 95%, significantly higher than the industry average. This positions the company favorably amid price competition in the automotive sector [3][10]. - The company has successfully developed two key products: 1. European-style guide groove, which has broken foreign monopolies and is expected to see increased penetration as the average price of domestic vehicles rises [3]. 2. Frameless sealing strips, which are becoming mainstream in mid-to-high-end electric vehicles, with multiple projects already secured [3][11]. 4. Financial Forecast and Investment Recommendations - The company is projected to achieve revenues of 1.252 billion, 1.587 billion, and 1.983 billion yuan from 2024 to 2026, with corresponding net profits of 220 million, 286 million, and 365 million yuan. The price-to-earnings ratios are expected to be 15, 12, and 9 times, respectively [12][4]. - The report suggests that the company’s performance is expected to exceed market expectations due to its competitive advantages in technology, cost, and customer relationships [10].