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].

Core Viewpoint - The company plans to invest approximately 5 billion yuan in a new energy vehicle parts industrial base and R&D center in Changzhou, Jiangsu Province, as a strategic move to enhance its position in the automotive parts industry and capitalize on the transformation of the automotive sector [1][2]. Investment Project Summary - The project will focus on the R&D and production of components such as electric motor systems, chassis parts, and thermal management components for new energy vehicles, covering an area of about 270 acres [1]. - Funding for the project will come from self-owned funds, bank loans, and other self-raised funds, with investments being phased based on the project's progress [1][2]. - The company aims to establish a subsidiary in Changzhou to manage the land acquisition and future operations related to the project [1]. Strategic Impact - This investment is seen as a key strategic initiative to strengthen the company's layout in the new energy parts industry and enhance its R&D capabilities and manufacturing levels [1][2]. - The project is expected to solidify and elevate the company's market position in the automotive parts sector, transitioning from components to systems, which will positively impact long-term business layout and operational performance [2]. Financial Performance - In the first half of 2025, the company reported a revenue of 19.97 billion yuan, a year-on-year increase of 5.42%, and a net profit attributable to shareholders of 2.52 billion yuan, up 16.36% [2]. - The automotive parts segment generated a revenue of 9.83 billion yuan, reflecting a year-on-year growth of 7.47%, becoming a significant growth driver for the company [3]. Business Development - The company’s subsidiary, Yaxinke, achieved an 18.28% increase in revenue through cost optimization and market expansion, with steady growth in market share for various vehicle parts [3]. - The company has successfully launched new businesses such as air suspension and thermal management systems, while also securing new orders for 48V BRM motors in Europe and achieving mass production of high-voltage motors for light electric vehicles in India [3].

Core Viewpoint - The company is committed to enhancing quality and efficiency while returning value to shareholders, aligning with national policies and market demands for sustainable development and innovation [1][7]. Group 1: High-Quality Development Focus - The company aims to become a global leader in sustainable intelligent industrial solutions, emphasizing technological innovation and digital transformation [1]. - The coal machinery segment is adapting to market pressures by innovating and enhancing competitiveness, achieving a 137% year-on-year increase in overseas orders, totaling 775 million yuan [2][3]. Group 2: Technological Integration and Innovation - The company is transitioning from equipment-focused solutions to integrated intelligent systems, significantly improving coal mining efficiency and safety through data-driven management [3]. - New product developments include remote intelligent mining systems and mining robots, ensuring a leading position in the coal machinery market [3]. Group 3: Automotive Parts Segment Growth - The automotive parts segment is experiencing rapid revenue growth, driven by cost leadership and market share expansion in both domestic and international markets [3]. - The company is enhancing its R&D capabilities to support new business developments in air suspension and thermal management systems [3]. Group 4: Investor Returns and Communication - The company has a consistent cash dividend policy, distributing 11.20 yuan per 10 shares for the 2024 fiscal year, reflecting a commitment to shareholder value [7]. - Active investor relations management is emphasized, with efforts to enhance communication and protect the rights of all shareholders, particularly minority investors [7][10]. Group 5: Governance and Sustainable Development - The company is refining its governance structure to align with new legal requirements, enhancing transparency and accountability [9]. - Continuous efforts are made to deepen the ESG framework, focusing on environmental, customer, employee, and supply chain aspects to promote sustainable development [9]. Group 6: Employee Engagement and Responsibility - The company is implementing an employee stock ownership plan, with 307 employees participating, representing 2.19% of the total share capital, to foster engagement and align interests [10].

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]

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].

Investment Rating - The report maintains a "Recommended" rating for Zhongyuan Neipei (002448.SZ) [6] Core Views - The company achieved a revenue of 3.31 billion yuan in 2024, a year-on-year increase of 15.6%, while the net profit attributable to shareholders was 204 million yuan, a decrease of 34.4% [1] - In Q1 2025, the company reported a revenue of 950 million yuan, up 13.8% year-on-year, and a net profit of 111 million yuan, an increase of 25.9% [1] - The gross margin for 2024 and Q1 2025 was 25.7% and 27.8%, respectively, with fluctuations mainly due to changes in the business structure [2] Summary by Sections Financial Performance - The company’s gross margin fluctuated due to changes in domestic and overseas business proportions, with overseas revenue declining by 8% in 2024 due to economic downturns, while domestic revenue increased by 49% [2] - The expense ratio for 2024 and Q1 2025 was 14.5% and 12.6%, respectively, showing a continuous decline over five years, indicating improved cost control [2] Profit Impact - The profit was significantly impacted by a goodwill impairment of 120 million yuan related to the acquisition of Incodel Holding LLC in the U.S., leading to a net profit margin of 6.2% for 2024, down 4.7 percentage points year-on-year [3] - Excluding the goodwill impairment, the net profit for 2024 would have shown an approximate growth of 10% year-on-year [3] Business Development - The company maintains stable partnerships with major clients in the cylinder sleeve and piston product sectors, with sales growth of 17% and 23% for these products in 2024 [4] - New business ventures, such as the brake system and hydrogen energy projects, are progressing, with the brake system generating revenue of 473 million yuan and a net profit of 33.73 million yuan in its first full year [4] - The company is accelerating the construction of a production base in Thailand for cylinder sleeves, aiming for an annual output of 7 million units [3] Future Outlook - The company is expected to achieve revenues of 3.76 billion, 4.24 billion, and 4.78 billion yuan in 2025, 2026, and 2027, respectively, with year-on-year growth rates of 13.6%, 12.9%, and 12.7% [5] - Projected net profits for the same years are 377 million, 433 million, and 490 million yuan, with significant growth anticipated in 2025 [5]