Investment Rating - The report assigns a "Buy" investment rating for the company, marking its first coverage [2][13]. Core Insights - The company focuses on the core automotive components business, with robust growth driven by industrial robotics and overseas expansion [2]. - The company has established a dual-line industrial structure, covering both "automotive engine and body components" and "hydrogen energy power systems and components" [2]. - The company reported a revenue of 924 million yuan in Q3 2025, representing a year-on-year growth of 20.22%, and a net profit of 92 million yuan, up 64.72% year-on-year [2]. - For the first three quarters of 2025, the company achieved revenues of 2.867 billion yuan, net profit of 326 million yuan, and a non-recurring net profit of 318 million yuan, with respective year-on-year growth rates of 16.35%, 39.89%, and 55.76% [2]. - The company’s gross margin and net margin for the first three quarters were 27.88% and 12.87%, respectively, showing increases of 3.02 percentage points and 2.44 percentage points year-on-year [2]. Business Segmentation - In H1 2025, the company generated revenues from various segments: cylinder liners (1.04 billion yuan, +9.14%), brake drums (286 million yuan, +56.28%), piston rings (157 million yuan, +7.61%), electric controllers (153 million yuan, +7.20%), pistons (54 million yuan, +38.19%), and bearings (33 million yuan, +16.50%) [3]. - The brake drum business exhibited exceptional growth, with revenue growth exceeding 50%, becoming a key driver of overall performance [3]. - The company is actively addressing international market risks and is steadily advancing the construction of its production base in Thailand, increasing the total investment from 350 million yuan to 500 million yuan to support capacity expansion [3]. Technological Advantages - The company leverages its core technologies in diesel engines, including steel piston technology and friction pair sealing technology, to provide high-quality key components for diesel engines [4]. - The company has established a stable customer base, covering major domestic engine manufacturers and entering the supply chains of global companies like Cummins and Caterpillar [9]. Market Expansion - The company’s subsidiary, Henan Hengjiu Brake System Co., focuses on the research and production of bimetal composite brake drums, achieving significant sales growth of 286 million yuan in H1 2025 [10]. - The company is expanding its production capacity to meet growing market demand, with the second phase of the brake drum project completed in June 2025, increasing the annual production capacity to 1.4 million units [10]. Electric Control Actuators and Hydrogen Energy - The company has a complete product line in electric control actuators, successfully breaking the foreign brand monopoly in the high-end commercial vehicle sector [11]. - The company is proactively developing a complete ecosystem for hydrogen energy systems, having established partnerships for hydrogen equipment manufacturing and application scenarios [12]. Financial Forecast - The company is projected to achieve revenues of 3.901 billion yuan, 4.553 billion yuan, and 5.326 billion yuan for the years 2025, 2026, and 2027, respectively, with corresponding EPS of 0.69 yuan, 0.82 yuan, and 0.96 yuan [13][15].

Group 1 - The company is steadily advancing the construction and production planning of its Thailand factory based on market development pace and customer demand [1] - The designed annual production capacity for cylinder liners is 7.5 million units, while the designed annual production capacity for steel pistons is 300,000 units [1]

Investment Rating - The report initiates coverage with an "Outperform" rating for the company [3][5]. Core Views - The company is recognized as a global leader in cylinder sleeves, with a strong emphasis on research and development, and a diversified product matrix that opens up new growth opportunities [1][2][12]. - Revenue has shown stable growth, with a compound annual growth rate (CAGR) of 11.8% from 2014 to 2024, and a projected revenue of 33.1 billion yuan in 2024 [1][33]. - The company is strategically expanding into new business areas such as emergency power generator sets, brake systems, and electric control actuators, which are expected to enhance its core business [2][19]. Financial Performance - The company achieved a revenue of 19.43 billion yuan in the first half of 2025, representing a year-on-year increase of 14.6%, with a net profit of 2.34 billion yuan, up 32% year-on-year [1][12][33]. - The financial forecast indicates revenues of 33.1 billion yuan in 2024 and 39.84 billion yuan in 2025, with net profits expected to reach 4.08 billion yuan in 2025 [4][33]. Business Segments - The revenue structure as of the first half of 2025 shows that internal combustion engine components account for 66.1%, automotive electronics 7.9%, brake systems 14.7%, and other businesses 11.3% [1][12]. - The company is focusing on expanding its internal combustion engine business, which includes cylinder sleeves, pistons, and other key components, while also exploring opportunities in hydrogen fuel cells and related technologies [2][19][25]. Research and Development - The company places a high priority on R&D, with an investment of 83.85 million yuan in the first half of 2025, representing 4.3% of its revenue [37]. - A new industrial development research institute was established in Shanghai to focus on forward-looking technologies and emerging industries [37]. Production Capacity - The company has implemented lean manufacturing and automated production lines, with a total production capacity of 75 million cylinder sleeves annually and plans for further expansion in Thailand [41][42]. - The strategic layout includes multiple production bases across China and an ongoing investment in overseas production to mitigate geopolitical risks [42].

Core Viewpoint - The company is a leading global supplier of cylinder liners with deep technical accumulation, evolving from a state-owned factory established in 1958 to a major player in the industry. Its revenue structure as of H1 2025 includes 66.1% from internal combustion engine components, 7.9% from automotive electronics, 14.7% from braking systems, and 11.3% from other businesses [1][11][12]. Revenue Growth and Financial Performance - The company has maintained stable revenue growth over the years, with revenue increasing from 1.08 billion yuan in 2014 to 3.31 billion yuan in 2024, representing a compound annual growth rate (CAGR) of 11.8%. In H1 2025, revenue reached 1.943 billion yuan, up 14.6% year-on-year, with a net profit of 234 million yuan, reflecting a 32% increase [2][3][30]. Business Segments and Product Matrix - The company has diversified its product offerings into four main segments: 1) core components for internal combustion engines (cylinder liners, pistons, piston rings, and bearings), 2) automotive electronics, 3) braking system components, and 4) hydrogen and fuel cell system components. The internal combustion engine business serves as a stable revenue base while actively expanding into growth areas [19][20][22]. Internal Combustion Engine Business - The company has a strong presence in the internal combustion engine sector, producing key components such as cylinder liners and pistons. It is positioned at the forefront of engineering equipment research and new materials, with significant clients including Caterpillar, MTU, and Cummins. The company aims to capture market share in the large-diameter diesel generator set market, enhancing its profitability [4][5][51]. Braking Systems and New Business Opportunities - The company’s dual-metal composite brake drum products have seen a revenue increase of 56.3% year-on-year in H1 2025. The electric control actuator business is also expanding, with new product and customer development expected to drive growth. The company is exploring opportunities in hydrogen fuel cell systems and related components, leveraging its technical capabilities and customer resources [6][7][19]. Research and Development Focus - The company places a high emphasis on research and development, with R&D expenditures amounting to 83.85 million yuan in H1 2025, representing 4.3% of revenue. It has established a national-level enterprise technology center and is actively involved in developing advanced technologies in the industry [38][39]. Production Capacity and Efficiency - The company employs a lean manufacturing model and has made significant investments in automation to enhance production efficiency. As of the end of 2024, it operates 32 casting lines for cylinder liners and has plans to expand production capacity in Thailand to mitigate geopolitical risks [43][45][46]. Customer Base and Market Expansion - The company has established solid strategic partnerships with leading domestic and international clients, including major players in the internal combustion engine sector. Its products are exported to over 60 countries, serving clients such as Ford, General Motors, and Mercedes-Benz [28][36].

Product Portfolio - The company has developed a product structure consisting of four major segments: internal combustion engine components, automotive electronics, braking systems, and hydrogen energy [2][3] - The internal combustion engine segment includes cylinder liners, pistons, piston rings, and bearings, with cylinder liners recognized as a manufacturing champion and holding a leading global market share [2] - The automotive electronics segment focuses on turbocharger electronic actuators, which have seen a year-on-year increase in market share [2] - The braking system segment features composite brake drums, which are positioned at the forefront of the industry due to technological advantages and product performance [2] - The hydrogen energy segment includes a comprehensive range of products such as hydrogen fuel cell engines and bipolar plates [2] Overseas Expansion - The company plans to invest no more than RMB 350 million to establish a factory in Thailand, aiming to enhance its global market presence [3] - The Thai factory will feature four casting production lines and 18 cylinder liner processing lines, with an annual design capacity of 7 million cylinder liners [3] - The first casting production line has been completed, and the initial batch of qualified products has been successfully produced [3] Product Advantages and Capacity Expansion - The company's dual-metal composite brake drum offers advantages such as lightweight design, improved durability, and better thermal performance compared to traditional brake drums [4] - The second phase of the brake drum project was completed and put into production in June 2025, with an overall planned annual capacity of 1.4 million units [4] - The company will adjust production lines based on market demand to meet both domestic and international customer needs [4] Electric Actuator Development - The electric actuator product line includes various models for gasoline and diesel engines, with advantages in size, weight, integration, and cost [5][6] - The company has secured a significant order from an international client for its diesel engine smart electric actuators, breaking the monopoly of foreign brands in the high-end commercial vehicle market [6] - Continuous investment in production line expansion is planned to meet the growing demand for electric actuators [6] Research and Development Initiatives - In 2024, the company established an industrial development research institute in Shanghai, focusing on internal combustion engine research, new energy development, and automotive electronics [7] - The research institute aims to enhance innovation and support the company's technological advancements and industrial upgrades [7]

Group 1 - The stock price of Zhongyuan Nepe reported at 9.18 yuan, down 0.29 yuan from the previous trading day, with a decline of 3.06% [1] - The opening price for the day was 9.48 yuan, reaching a high of 9.53 yuan and a low of 9.14 yuan, with a trading volume of 222,150 hands and a transaction amount of 206 million yuan [1] - Zhongyuan Nepe's main business is automotive parts manufacturing, with key products including cylinder sleeves, pistons, and piston rings, which are core components of engines [1] Group 2 - Zhongyuan Nepe's subsidiary, Zhongyuan Nepe (Shanghai) Electronic Technology Co., recently received a designated notification from a well-known European engineering group, becoming a supplier for its intelligent electronic control actuator products [1] - This project is expected to start mass supply in 2027, with a total sales amount of approximately 490 million yuan over a lifecycle of 9 years [1] Group 3 - On August 14, the net outflow of main funds was 25.1963 million yuan, with a cumulative net outflow of 62.6021 million yuan over the past five days [2]

Group 1 - The latest stock price of Zhongyuan Neipei is 8.82 yuan, an increase of 1.73% compared to the previous trading day [1] - The opening price was 8.61 yuan, with a highest point of 8.83 yuan and a lowest point of 8.58 yuan, with a trading volume of 118,648 hands and a transaction amount of 104 million yuan [1] - Zhongyuan Neipei operates in the automotive parts industry, focusing on the research, production, and sales of core engine components [1] Group 2 - The company ranks among the top in the industry for the production and sales of cylinder sleeves, which are widely used in automobiles, engineering machinery, and agricultural machinery [1] - The large-diameter cylinder sleeves produced by Zhongyuan Neipei and its subsidiaries are compatible with diesel generator sets, serving well-known brands such as Caterpillar, MTU, Cummins, Weichai, and Yuchai [1] - The market demand for diesel generator sets, which are essential for the power redundancy system in data centers, continues to grow [1] Group 3 - On August 4, 2025, the net outflow of main funds from Zhongyuan Neipei was 5.7359 million yuan, accounting for 0.13% of the circulating market value [1] - Over the past five trading days, the cumulative net outflow reached 57.5127 million yuan, representing 1.34% of the circulating market value [1]

Performance Forecast - The company expects a net profit of 218 million to 249 million yuan for the current reporting period, representing a year-on-year growth of 23.21% to 40.73% compared to 176.94 million yuan in the same period last year [1] - The profit attributable to shareholders is projected to be 214 million to 245 million yuan, with a year-on-year growth of 34.72% to 54.23% compared to 158.85 million yuan in the previous year [1] - Basic earnings per share are estimated to be between 0.37 yuan and 0.42 yuan, up from 0.30 yuan per share in the previous year [1] Reasons for Performance Change - The company has actively seized market opportunities and expanded market share despite the complex domestic and international economic environment [1] - Significant growth in the production and sales of core products such as cylinder liners, pistons, brake drums, and electronic control actuators has been achieved compared to the previous year [1] - Continuous optimization of resource allocation, cost reduction, and control of period expenses have further enhanced profitability, leading to stable growth in operating profit [1]

Group 1 - The company is currently constructing machining and casting production lines at its Thailand factory, with cylinder sleeve products expected to start production in the third quarter [2] - To accelerate its overseas business strategy, the company increased its investment in the Thailand subsidiary by 41 million Thai Baht, raising the total investment from no more than 210 million RMB to no more than 350 million RMB [2] - After the capital increase, the design plan for the Thailand factory will include 4 casting production lines and 18 cylinder sleeve machining lines, with an annual design capacity of 7 million cylinder sleeves [2] Group 2 - The company's core products are divided into four main segments: key internal combustion engine components (cylinder sleeves, pistons, piston rings, and bearing shells), automotive electronic turbocharger control actuators, composite brake drums for braking systems, and hydrogen fuel cell engines and their core components [2] - The company maintains stable gross margins through high-end research platforms, lean cost control, major customer development capabilities, and efficient team management [2] - The subsidiary Hengjiu Braking's second phase project for bi-metal brake drums is expected to complete machining line debugging and commence production by late June this year, increasing annual production capacity to 1.4 million units [2] Group 3 - The company recently signed a strategic cooperation agreement with Sunshine New Energy to collaborate in hydrogen equipment manufacturing, hydrogen production and refueling facility construction, and hydrogen vehicle applications, focusing on hydrogen infrastructure and scenario implementation in Henan Province [3] - The company is also exploring cooperation opportunities in the humanoid robot sector, aligning with industry trends and business needs [3]

Product Structure - The company's main product layout is divided into four major segments: core components for internal combustion engines (cylinder sleeves, pistons, piston rings, and bearings), electronic components in the automotive sector (turbocharger electronic actuators), composite brake drums in the braking system, and hydrogen fuel cell engines and core components in the hydrogen energy sector [2][3]. Thailand Factory Investment - In March 2025, the company increased its investment in the Thailand factory by 410 million Thai Baht, raising the total investment from no more than 210 million RMB to no more than 350 million RMB. The factory's design now includes four casting production lines and 18 cylinder sleeve processing lines, with an annual design capacity of 7 million cylinder sleeves. Production is expected to commence in the third quarter [2][3]. Gross Margin Stability - The company's stable gross margin is attributed to several factors: 1. A highly experienced R&D team and a comprehensive high-end scientific research innovation platform that enhances product competitiveness. 2. Cost control through lean production and increased automation, improving input-output ratios. 3. A strong marketing team and effective guidelines that have led to a stable increase in major clients. 4. Enhanced organizational coordination and talent development that drive steady business progress [3]. Brake Drum Production Capacity - The second phase of the brake drum project is expected to complete machinery adjustments by the end of this month, with an overall annual production capacity of 1.4 million units. The subsidiary has been operating at full capacity due to strong market demand, and the new production line will help meet the increasing market needs [3]. Robotics Sector Interest - The company is considering opportunities in the humanoid robotics sector while continuing to focus on the automotive parts industry. It aims to explore collaborations in upstream and downstream sectors to identify new application areas [3]. Hydrogen Energy Cooperation - A strategic cooperation agreement with Sunshine New Energy includes collaboration in hydrogen equipment manufacturing and application scenarios. The partnership aims to leverage both companies' strengths in hydrogen energy investment and manufacturing, focusing on projects like hydrogen stations and green hydrogen production [4].