Cold extrusion situation of auto parts

It is estimated that the price of precision cold forging for valve group of single passenger car is 12.96 yuan, and the price of precision cold forging for valve transmission group of single passenger car is 145.28 yuan. We estimate that the market scale of precision cold forgings for valve groups of passenger cars in China and Europe and the United States in 2016/2020 will total 661/802 million yuan, while in 2016, the company's revenue from precision cold forgings for valve groups will be only 97 million yuan, with a large market space at home and abroad. We believe that, as the company actively develops new customers in new markets, the company's traditional valve group precision cold forging business is expected to achieve rapid growth in the future.

We estimate that in 2016/2020, the domestic and European and American market scale of precision cold forgings for valve transmission sets of passenger cars will be 7.408 billion yuan/8.989 billion yuan respectively, while in 2016, the company's revenue from precision cold forgings for valve transmission sets will be only 56 million yuan, with huge market space. We believe that, as North and South Volkswagen and BYD have successively scaled up their supporting facilities, and are actively developing new customers and new markets (they have obtained the qualification of German Volkswagen for fixed-point supply of hydraulic tappet projects in the European market), the company's precision cold forging business for valve drive sets is expected to maintain rapid growth, and continue to become a highlight of the company's growth. At the same time, the subsequent production release of the raised investment project will also provide support for the growth of the company's main business.

In the long run, the company is actively researching and developing new projects. At the same time, it plans to continue to develop automobiles (including new energy vehicles), motorcycles, electric tools, household appliances and aerospace military industries in the future. The potential market development space is worth further looking forward to.

We expect to achieve an operating revenue of RMB 229/329/471 million in 2017-19, a year-on-year increase of 44. 84/43.51/43.22% ； The net profit attributable to the parent company was RMB 82/116/164 million, a year-on-year increase of 47.59/41.45/41.94%, corresponding to EPS of 1.36/1.93/2.74 yuan/share. In 2017, the dynamic PE was 62 times, and the rating of "increase in holdings" was given for the first time.

Risk warning of mold manufacturers: the prosperity of the automobile industry is lower than expected; The price of raw materials rose more than expected; The growth of period expenses exceeded the expectation; The development progress of new customers and new projects is lower than expected.