Investment Rating - The report maintains a "Positive" investment rating for the industry [10]. Core Insights - The report highlights that high-level intelligent driving is accelerating the penetration of steer-by-wire (SBW) systems, which are expected to replace traditional mechanical chassis. The steer-by-wire technology is currently in the product introduction phase and is anticipated to enter mass production in 2025. The market for steer-by-wire is projected to reach 68.3 billion yuan by 2030, with a CAGR of 7.9% from 2023 to 2030 [3][9]. Summary by Sections Introduction - The demand for automotive intelligence is driving the continuous upgrade of intelligent driving systems, with L2 and above levels expected to penetrate over 50% of the market. The steer-by-wire system, currently with a penetration rate of less than 1%, has significant growth potential [6][25]. Trends - The transition from mechanical steering to electric steering and now to steer-by-wire is evident. The electric power steering (EPS) market is nearing saturation, with a penetration rate close to 100%. The steer-by-wire system is expected to become a key component in L3 and above autonomous driving, with a projected domestic penetration rate of 30% by 2030 [7][49]. Market Structure - The EPS market is primarily dominated by foreign companies, with the top five players holding significant market shares. Domestic companies are expected to catch up in the steer-by-wire market, with some already achieving mass production [8][9]. Investment Recommendations - The report suggests that the steer-by-wire system is on the verge of mass production, presenting substantial growth opportunities for domestic companies. It recommends companies like Top Group and Berteli, which are making significant progress in this area [9][11].

Overview - Bethel Automotive Safety Systems Co., Ltd. is issuing convertible bonds totaling 280,200 million yuan (28,020,000 bonds) [4][8] - The bonds will be listed on the Shanghai Stock Exchange on July 28, 2025 [4][9] - The bonds have a maturity period from July 1, 2025, to June 30, 2031, with a conversion period from January 7, 2026, to June 30, 2031 [4][8] Company Information - The registered capital of Bethel Automotive Safety Systems Co., Ltd. is 606.51 million yuan [9] - The company was established on June 25, 2004, and went public on April 27, 2018 [9] - The company specializes in the research, manufacturing, and sales of automotive safety system components, electronic control modules, and related consulting services [9] Bond Details - The convertible bond is named "伯 25 转债" with the code 113696 [4][9] - The bonds are rated AA by Zhongzheng Pengyuan Credit Rating Co., Ltd., with a stable outlook [5][6] - The bonds are unsecured and will not provide any guarantees [5] Issuance Process - The issuance will prioritize existing shareholders, with any remaining bonds available to the public through the Shanghai Stock Exchange [8][9] - If the subscription amount is less than 280,200 million yuan, the lead underwriters will underwrite the shortfall [8] Historical Context - The company previously issued convertible bonds totaling 90,200 million yuan in 2021, which were listed on July 21, 2021 [20] - The company has a history of share repurchase and employee stock ownership plans, indicating a commitment to shareholder value [15][21][28]

Investment Rating - The report assigns a "Buy" rating for the company with a target price of 7.32 HKD, indicating an expected relative return of over 20% within six months [5][56]. Core Viewpoints - Zhejiang Shibao is positioned as a leading enterprise in the automotive steering system sector in China, with a focus on the development, manufacturing, and sales of steering systems. The company has successfully transitioned from traditional hydraulic systems to electric power steering (EPS) and is set to launch steer-by-wire systems in 2026 [1][4]. - The company has experienced significant revenue growth due to the introduction of new products and expansion into new customer segments, particularly with the rise of electric vehicles and new energy commercial vehicles [2][3][4]. Summary by Sections Company Overview - Zhejiang Shibao, established in 1993, is a key player in the automotive steering system industry in China, transitioning from mechanical and hydraulic steering systems to electric power steering [12][18]. - The company serves a diverse customer base, with 82% of revenue from passenger vehicles and 18% from commercial vehicles in 2024 [19][22]. Development Stages - From 2015 to 2019, the company faced challenges with revenue growth not translating into profit due to high costs and quality issues affecting exports [2][25]. - Post-2020, the company capitalized on the recovery of the automotive market and expanded its customer base, leading to improved capacity utilization and profitability [2][40]. Embracing New Technologies - The company is actively pursuing steer-by-wire technology, which eliminates mechanical linkages and enhances vehicle design flexibility. Initial production is expected in 2026 [3][51]. - In the commercial vehicle sector, the company has developed electric hydraulic and electric steering systems, aligning with new emission standards and increasing demand for energy-efficient solutions [3][55]. Profit Forecast and Valuation - Revenue projections for 2025-2027 are 35.1 billion, 43.7 billion, and 52.0 billion CNY, with corresponding net profits of 2.7 billion, 3.8 billion, and 5.1 billion CNY, reflecting significant growth rates [4][56]. - The company is valued at a 20X PE ratio for 2025, leading to a target market capitalization of 55 billion HKD [4][56].

Financial Data and Key Metrics Changes - The company achieved a record revenue of $4.3 billion in 2024, an increase of 1.6% compared to 2023, driven by strong customer production schedules in APAC with China OEMs [12][41][46] - EBITDA grew by 22.5% year-over-year, reaching $424 million, with margins expanding by 170 basis points compared to 2023 [40][49] - Net profit improved by 68% to $62 million, with a margin increase of 50 basis points [42][58] - Free cash flow rose to $166 million, an increase of $61 million compared to 2023 [40][60] Business Line Data and Key Metrics Changes - The company launched a record 77 customer programs in 2024, with 45 tied to electric vehicle programs [13][16] - Customer program bookings totaled $6 billion in lifetime revenue, including significant steer by wire production awards [14][20] - The APAC division achieved record revenue of $1.3 billion, growing more than 10% compared to 2023 [14][48] Market Data and Key Metrics Changes - APAC adjusted revenue increased by 11.7%, significantly outperforming the market by 11.3%, driven by new and conquest program launches [46][47] - North America revenue decreased by 2.9% to $2.19 billion, while EMEA SA revenue slightly declined [48][49] - The company is now the number one steering supplier in the China market among domestic OEMs [12][15] Company Strategy and Development Direction - The company aims to drive innovation and growth, focusing on becoming a leader in motion control technology [5][6] - Key strategies include expanding the customer base, strengthening technology leadership, optimizing cost structures, and targeting emerging markets like China and India [11][12][29] - The company is committed to leveraging AI technology and automation to improve operational efficiencies [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the steer by wire technology, particularly in the China market, which is expected to lead in adoption [33][82] - The company anticipates a flat global OEM production volume in 2025, with expectations to outperform the market by 200 to 300 basis points in revenue [61][63] - Management is actively working to mitigate tariff costs and is preparing plans for compliance with USMCA requirements [76][77] Other Important Information - The Board approved a dividend increase to $22 million, representing a 35% payout ratio, up from a historical 20% [15][40] - The company opened a new facility in Changshu, China, to enhance manufacturing and testing capabilities [26][28] Q&A Session Summary Question: Can you provide more details about the steer by wire project size and content compared to traditional EPS? - Management indicated that the steer by wire system for the North American EV leader is a road wheel actuator, similar to a dual pinion system, with additional safety redundancies [68][69] Question: Are there discussions with OEM customers regarding potential tariffs and production shifts? - Management noted that the tariff environment is dynamic, and they are working with customers to mitigate costs and develop countermeasure plans [75][76] Question: What is the expected steer by wire revenue mix by 2027-2030? - Management expects steer by wire to represent about 5% of total revenue by 2027-2030, with China leading in adoption [82] Question: What is the outlook for the U.S. auto market growth amid tariffs and inflation? - Management anticipates a 3% reduction in North American production volumes, which could be at risk due to tariffs and consumer sentiment [84][85] Question: What is the latest margin guidance for the near term? - Management did not provide specific guidance but indicated a focus on improving margins, with expectations for incremental expansion into 2025 [87]