How long does it take to go from zero to achieve replacement?
We know that for a high-quality SUV, if you want to have the passing performance of an off-road vehicle, but also the comfort of a sedan. Then the air suspension system is the best choice to achieve this goal.
Because this system can control the air supply unit and air spring assembly according to real-time road conditions, to increase or decrease the ground clearance of the automobile chassis, so as to increase the car's passability when encountering complex road conditions, as well as the stability at high speeds.
Nowadays, automotive intelligent technology is gradually maturing, and it has become a standard configuration in models such as Xiaomi SU7 and Huawei Wenjie.
At present, with the increase in sales of more than 300,000 models in the domestic new car market, the demand for air suspension systems is also growing rapidly.
The data predicts that by 2025, the market size of air suspension will reach 37.79 billion, with a CAGR of 41.3%, and achieve a penetration rate of 15%, and even, the scale will exceed 59 billion by 2028, with huge growth potential.
Behind this, in fact, is the rapid rise of domestic air suspension suppliers.
In the past few years, domestic suppliers such as Baolong Technology, Zhongding Co., Ltd. and Tuopu Group have gradually replaced foreign supply and become the main force in the market.
By April 2024, the share of domestic suppliers in the air suspension market has exceeded 80%, you know, this number in 2020 is still 0.
Among them, Zhongding Co., Ltd., as a leading manufacturer of auto parts, has a business covering many fields such as intelligent chassis, sealing system and cooling system, and is the most robust existence.
On the one hand, in terms of performance.
Over the past few years, the company's revenue and net profit have both shown a steady growth trend. Revenue has steadily increased from 11.55 billion in 2020 to 17.24 billion in 2023, with a compound annual growth rate of 14.3%. The net profit in 2023 will be 1.131 billion, an increase of 16.78% year-on-year.
In the first half of 2024, the performance of peers such as Tuopu Group and Baolong Technology has declined to varying degrees, while the revenue of Zhongding Co., Ltd. has increased by 18.08% year-on-year, and its net profit has increased by 34.83% year-on-year, which also far exceeds that of its peers such as Bethel and Zhejiang Shibao, both of which have shown a high growth state.
On the one hand, in terms of operational capabilities.
From 2020 to 2023, compared with the fluctuating trend of Tianrun Industry, Tuopu Group and Baolong Technology, the company's total asset turnover rate has shown a steady upward trend, reaching 0.79 times in 2023, which shows that the utilization efficiency of its assets has been significantly improved.
At the same time, the company's inventory turnover rate is 3.7 times, far exceeding that of Tuopu Group and Baolong Technology, which shows that the company's inventory turnover is fast, and the liquidity of inventory is good and the liquidity is strong.
In addition, Zhongding shares also have a particularity.
That is, the air supply unit in its air suspension system was obtained through the acquisition of Germany AMK, that is, the hardware system such as gas springs and air tanks was directly introduced, as well as the core technology and formula in the rubber field.
You know, AMK is one of the top three companies in the world, competing with Continental and Vibrtech on the same track, and is a high-end supplier of automotive air suspension systems, electronic control and motor systems. Over the years, it has been produced for Mercedes-Benz, BMW, Audi, Volvo and Jaguar Land Rover.
At present, AMK's subsidiaries in China have been implemented and localized, which has the following advantages compared with domestic and foreign countries:
First, technical advantages.
Especially in the subdivision of one of the cores of air suspension, the air supply unit.
We know that an air supply system consists of components such as an air compressor, a solenoid valve unit, and a temperature sensor. The core component of the air compressor, the technical parameters required are extremely high, and the technical difficulties are concentrated in the temperature range of -40 °C to 80 °C, and the pressure environment of 18-20 bar to maintain stable and continuous operation, which creates barriers and restricts the entry of new competitors.
At present, in this regard, the company has mastered core technologies such as air compression and storage, sensor electronic control, etc., and occupies 70% of the domestic market share, which is in an absolute leading position.
Second, the price advantage.
Nowadays, in order to meet the strong demand of OEMs for cost reduction, the company is constantly promoting the implementation of self-produced projects such as gas storage tanks to increase the proportion of self-produced hardware, so as to better control costs and quality, and reduce dependence on overseas suppliers.
With the acceleration of the localization of overhang assemblies in the market, the corresponding reduction of import costs, tariffs and other expenses has also made the company's hardware solutions lower than those of overseas suppliers such as Vibrator, so they are more competitive.
As of July 2024, the company's air suspension business has obtained a total order output value of more than 14.4 billion, with sufficient orders, and the air suspension business in the first half of 2024 contributed revenue of 570 million, a year-on-year increase of 60%.
So, where is the future growth logic of Zhongding shares?
A new energy vehicle drives an increase in the demand for seals.
We know that the sealing system of the car can effectively avoid the leakage of electrolyte inside the battery pack, prolong the life of the battery pack, or fully seal the charging interface to solve the problem of current leakage and short circuit.
Let's take the rubber seal in the system, it is an important part of the sealing system and a necessary accessory for new energy vehicles.
Therefore, the increase in the penetration rate of new energy vehicles also provides a broad space for the development of the automotive rubber seal market. According to the data, the penetration rate of new energy vehicles has been rising in recent years, and it has exceeded 50% in July 2024.
Coupled with the continuous improvement of automobile use scenarios and the upgrading of the structure of seals, the data is estimated to be 18.6 billion by 2026, with a CAGR of 18.8% from 2024 to 2026.
Then, as the absolute leader in the market share of the first domestic rubber parts field, Zhongding shares have been stable at 20% of its sealing system business for many years, and it is expected to fully benefit from market development in the future.
One is that the automotive lightweight market has a broad space.
By reducing the weight of the whole vehicle, lightweight can reduce the energy consumption of the vehicle and improve the battery life.
The main lightweight is to develop aluminum alloy technology to replace the role of steel in the car, achieve the purpose of weight reduction, and improve the weight reduction rate. After all, steel is very dense and is used in more than 50% of the vehicle.
In addition, in traditional cars, the weight of the chassis accounts for a large proportion of the whole vehicle, reaching 27%. At present, its lightweight process is in the stage of accelerated expansion.
According to the data, the growth trend of automotive aluminum alloy chassis parts is very certain, and it is expected that by 2026, the domestic market size will be 56.03 billion, with a CAGR of 4% from 2024 to 2026.
For Zhongding Co., Ltd., the company began the layout of lightweight business as early as 2015, and now it has gained a foothold in the high-end market, not only providing chassis assemblies for Huawei automobiles, but also supplying to many leading OEMs such as BYD, Mercedes-Benz and GAC.
In the first half of 2024, the revenue contributed by the chassis lightweight business increased by 156% year-on-year, and it will fully benefit from this incremental market in the future and obtain performance release.
Finally, to sum up.
Zhongding's performance is very stable and its operating capacity is outstanding, attracting nearly 330 institutions to hold positions. In the future, the company is expected to continue to expand its performance increment with the increase in demand for sealing systems and the development of automobile chassis.
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Source: Flying Whale Investment Research