Hongfa (600885) Company Research: Electric Vehicle Wave Strikes Attempts to Enter a New Boom Cycle

Hongfa (600885) Company Research: Electric Vehicle Wave Strikes Attempts to Enter a New Boom Cycle

The global leader in relays has been manufacturing high-end “core assets” with the potential.

Hongfa has been focusing on the relay field for more than 35 years. The winning business structure based on quality is the key to the success of the company’s series of business layouts.

In 2018, Hongfa Relays accounted for 14% of the world’s total and China’s 25.

0%, ranking first in the world.

In 2019, Hongfa’s relay assembly line 南京桑拿网 automation rate has reached more than 80%, and the customer complaint rate is only 0.

13PPM, far exceeds the requirements of the general manufacturing industry for accuracy and quality. In the future, with continuous capital expenditure, the leading edge will continue to expand.

We believe that Hongfa has fully developed the potential of “core assets” in high-end manufacturing, and the company’s evaluation system and estimation center are expected to upgrade from general industrial products to advanced manufacturing.

Hongfa fully benefited from the wave of electric vehicles.

The company’s products include seven major relay categories, such as GM, automotive, electric power (including new energy vehicles), and industrial control, as well as cultivated products such as capacitors.

The top four products with current revenue share are GM (home appliances) (38%), electricity (20%), automotive relays (10%), and new energy vehicles (9).

1%). In the future, the increase in the market share of new energy vehicles and automobiles will become the core of the company’s performance growth.

The current global electric vehicle penetration is accelerating, and the industry is facing a 1-N opportunity of policy and market dual resonance. We estimate that the global new energy vehicle relay market will reach 8.2 billion by 2025, which is 4 times that in 18 years. Hongfa ‘s domestic market share40%, with high-quality customers such as CATL, BYD, etc., and have made breakthroughs overseas since 19 years. At present, they have received orders from Volkswagen, Daimler, Tesla, Ford and other customers.

In the automotive field, Hongfa acquired Haila Automotive Electronics at the end of 19th, and its customer resources have been enriched again. The contraction of its competitors will also help Hongfa become a global leader in automotive relays.

The downstream of relays is extensive, and the gradual innovation features are conducive to the continuous expansion of the faucet expansion.

The relay is a basic electronic component, and the risk of technology replacement is low. There is a rigid demand. The global market size is nearly 50 billion yuan.

Product quality and consistency + incremental innovation reserves are the core of differentiated competition for relay companies. The current stage of the industry is more conducive to the expansion of the leader (through high-quality customer structure and product experience accumulation), and a winner-take-all competition pattern may emerge.

Since its establishment, Hongfa has continuously learned from companies in Europe, Japan and other countries.

Investment suggestion: Based on the needs of Hongfa’s main products in the downstream industry, its own production scheduling and the development of new industries, we estimate that the company’s net profit attributable to its mother in 2019-2021 will be 7, respectively.

06/8.

69/10.

43 ppm, an increase of 1 each year.

0% / 23.

1% / 19.

9%, EPS is 0.

95/1.

17/1.

40 yuan.

Maintain “Buy” investment rating.

Risk warning: new energy vehicle sales risk, home appliance demand risk, low-voltage appliance market development risk, exchange rate risk.