Chuanhuan Technology(300547) 东兴证券·2024-10-28 10:32Investment Rating - The report gives a "Recommend/First" rating to Sichuan Chuanhuan Technology (300547 SZ) [1] Core Views - Sichuan Chuanhuan Technology is a leading domestic supplier of automotive pipeline systems, with a strong focus on R&D and cost control, positioning it for potential excess growth [1] - The company benefits from the growth of the automotive pipeline market driven by emission upgrades and the expansion of new markets such as energy storage and data centers [2] - The company's strong R&D capabilities, cost control, and market expansion in traditional and emerging sectors are key investment highlights [3] Company Overview - Sichuan Chuanhuan Technology specializes in the R&D, design, manufacturing, and sales of rubber and plastic hoses for automotive and motorcycle applications [4] - The company has a diverse product portfolio, including fuel system hoses, cooling system hoses, brake system hoses, and more, earning it the nickname "Automotive Hose Supermarket" [15] - It has a strong customer base, covering over 50 automotive OEMs and 50 motorcycle manufacturers, with partnerships with major players like BYD, Geely, and SAIC [16] Market Opportunities - The automotive pipeline market is expected to grow due to stricter emission regulations and the rise of new energy vehicles (NEVs), with the thermal management pipeline market in China projected to reach 15 1 billion yuan by 2024 [2] - The energy storage and data center markets present new growth opportunities, with the energy storage liquid cooling pipeline market in China expected to reach 4 5 billion yuan by 2028 and the data center liquid cooling market projected to reach 2 2-3 1 billion USD by 2028 [2] Financial Performance - The company's revenue has been growing steadily, with 2023 revenue reaching 1 109 billion yuan, a 22 3% year-on-year increase, and H1 2024 revenue growing by 39 1% year-on-year [1] - Net profit margins have improved from 13 5% in 2021 to 14 6% in 2023 and 15 4% in H1 2024, driven by strong cost control and operational efficiency [1] - The company's gross margin has remained stable, with a 2023 gross margin of 25 83% and H1 2024 gross margin of 25 13% [23] R&D and Innovation - The company has strong R&D capabilities, with a focus on material and process innovation, as evidenced by its numerous patents and R&D projects [3] - It has developed advanced materials and processes, such as modified fuel pipeline materials and liquid cooling pipeline TPV materials, to meet the demands of new energy vehicles and other emerging markets [56] Competitive Advantages - Sichuan Chuanhuan Technology has a competitive edge in cost control, with lower period expense rates compared to peers, contributing to higher profitability [3] - The company's ability to provide integrated pipeline solutions and its strong customer relationships in both traditional and emerging markets further enhance its competitive position [3] Future Growth Prospects - The company is expected to achieve revenue of 1 45 billion yuan in 2024, 1 84 billion yuan in 2025, and 2 34 billion yuan in 2026, with net profits of 210 million yuan, 263 million yuan, and 335 million yuan respectively [8] - The growth is driven by the expansion of the automotive pipeline market, particularly in NEVs, and the company's successful entry into the energy storage and data center markets [2][3]