Aijian Securities: Initial Coverage of Forvei Co., Ltd. with Buy Rating

Aijian Securities Co., Ltd. Wu Di, Xu Shujing recently conducted research on Fuwei Co., Ltd. and published the research report “First Coverage: Stable Main Business, Awaiting Growth in Emerging Businesses.” This is the first coverage of Fuwei Co., Ltd., with a Buy rating.

Fuwei Co., Ltd. (600742)

Investment Highlights:

Investment Recommendation: We expect the company’s net profit attributable to parent company in 2025-2027 to be 550 million, 610 million, and 720 million yuan, respectively, with corresponding P/E ratios of approximately 15/13/11 times. The company has strong platform-based supporting capabilities, actively advancing business upgrades in areas such as intelligent cockpits and intelligent driving, and is exploring new tracks like robotics and low-altitude economy, which offer potential for medium- to long-term valuation recovery and growth. First coverage, with a “Buy” rating.

Industry and Company Overview: The company operates in the automotive parts industry, specifically in body accessories and trim fields. Currently, the industry shows significant structural differentiation, with increasing penetration of new energy vehicles, pressure on traditional fuel vehicles’ supporting parts, and continuous upstream price transmission to OEMs. The company is a core automotive parts platform within FAW Group, covering interior and exterior trims, bumpers, vehicle lights, stamping parts, etc., and is accelerating its smart transformation strategy. Additionally, through R&D collaborations, the company is expanding into new intelligent products: 1) collaborating with Beijing Daqi Yuequan and Jilin Bionic Robot Research Center to explore robotics, with the trained BOWEN W-Bot capable of autonomous operation of multiple single actions; 2) partnering with Wofei Changkong to develop eVTOL full interior cabins.

Different from Common Perceptions: 1) The market often views the company as a traditional auto parts supplier relying on FAW Group, but it is accelerating its transformation into an industry-leading integrated solutions provider and emerging application platform. The company has built a diverse customer matrix beyond FAW, including luxury carmakers and new forces, and is breaking traditional business boundaries through cross-industry integration, extending into robotics and eVTOL intelligent industries; 2) The company commits to distributing no less than 50% of its annual cash dividends from 2024 to 2026, with at least two dividend payments each year. The market may equate high dividends with low growth. However, benefiting from steady core business cash flow, the company can maintain high dividends while investing in new tracks, potentially achieving a high-dividend + high-growth valuation.

Key Assumptions: 1) Steady growth in core business, breakthroughs in emerging businesses: revenue CAGR for 2025-2027 is approximately 4.7%, 5.9%, and 7.6%, respectively, with other (emerging) business revenue growth rates of 3.0%, 10.0%, and 50.0%; 2) Improving profitability: gross profit margins for 2025-2027 are projected at 10.6%, 10.9%, and 11.3%.

Catalysts: 1) Well-known new energy vehicle brands’ fixed-point projects announced have begun mass supply as scheduled in Q1 2026, demonstrating the company’s breakthrough beyond FAW branding; 2) Progress in applying robotics in automotive production, R&D developments of eVTOL-related products, disclosures of industry fund investments, and new business incubation will reinforce the company’s recognition as an industry-leading integrated solutions provider and emerging application platform.

Risk Factors: 1) Automotive OEM clients’ production schedules underperform: if the overall automotive industry growth is below expectations or sales for FAW and key external clients weaken, the company’s core business revenue may struggle to grow steadily; 2) Business restructuring and extension delays: if the company’s push into new energy, smart cockpits, and smart driving products, as well as robotics and eVTOL, do not meet expectations, and traditional fuel vehicle clients remain dominant, valuation may be suppressed; 3) Raw material price fluctuations: in the highly competitive industry environment, significant upstream raw material price volatility could severely impact profit quality.

Latest profit forecast details are as follows:

The above content is compiled by Securities Star based on publicly available information, generated by AI algorithms (Wenxin Algorithm Backup 310104345710301240019), and does not constitute investment advice.