Hongfa(SH:600885) KAIYUAN SECURITIES·2024-04-22 14:00Investment Rating - The investment rating for the company is "Buy" (maintained) with a current stock price of 27.80 CNY [2] Core Views - The company has established itself as a global leader in the relay industry, achieving a market share of 19.4% in 2022. The company focuses on quality and has diversified its product offerings to navigate through economic cycles, with significant contributions from high-growth sectors such as electric vehicles [5][15] - Revenue projections for 2024-2026 are estimated at 143.80 billion CNY, 160.06 billion CNY, and 178.29 billion CNY respectively, with net profits expected to be 16.12 billion CNY, 18.44 billion CNY, and 21.02 billion CNY. The corresponding EPS is projected to be 1.55 CNY, 1.77 CNY, and 2.02 CNY, indicating a stable growth trajectory [5][9] Summary by Sections Company Overview - The company has been in the relay industry for 40 years, growing to become a global leader with a focus on quality and technological investment. It has undergone three development phases, with significant growth in market share from 11% in 2015 to 19.4% in 2022 [15][18] Product Segments - The company has a diversified product portfolio, including power relays, automotive relays, signal relays, and industrial relays, with respective global market shares of 56.5%, 20%, and approximately 30% in 2022. The automotive relay segment is expected to grow steadily due to acquisitions and improved product structure [6][37] - High-voltage direct current relays are primarily used in the electric vehicle sector, with a projected global market size in the billions. The company holds over 40% market share in this segment as of 2023 [7][8] Financial Performance - The company has shown consistent revenue and profit growth, with a CAGR of 14.2% in revenue and 15.6% in net profit from 2013 to 2023. The gross margin has remained stable, with a gross margin of 36.9% in 2023, reflecting effective cost management [19][28] - The company’s revenue from relays constitutes 84%-90% of total revenue, with a significant portion of sales coming from overseas markets, accounting for 35%-40% of total revenue [25][23] Market Position - The relay industry is characterized by a concentration of major players, with the company being a key domestic competitor against foreign brands. The market is expected to benefit from the growth of new energy sectors and smart grid initiatives [41][48] - The company has a simple ownership structure, with core management and technical staff holding a significant stake, which supports its strategic direction and operational stability [18]