Key takeaway

The company’s operating scale expanded steadily, its global presence accelerated, and the share of overseas revenue has exceeded 51%, with continuous breakthroughs in projects from high-end clients. High gross margin core businesses (valve train assemblies and commercial vehicle components) drove profitability improvement, while expense control remained solid and revenue structure optimization delivered notable results. Meanwhile, leveraging its technological advantages in cold precision forging, the company is actively expanding into precision components such as new materials and screws. It has obtained multiple patents and established full process development capabilities. The screw business is expected to become a new growth curve.

Quick Take

Operating scale expands steadily, and global expansion continues to accelerate. By product in 2025, revenue from valve train assembly products increased 22.88%, accounting for 76.43% of total revenue. By industry, revenue from passenger vehicle and commercial vehicle components increased 18.9% and 25.71%, accounting for 72.02% and 18.33% of revenue respectively. By region, overseas revenue increased 40.26%, with its share of revenue exceeding 50% for the first time. Among them, revenue from the European and Mexican subsidiaries increased 46.24% and 53.47% YoY respectively. The company secured new projects from high end clients such as Rolls Royce, BMW Motorrad, and JMC. The synergy of its global sales network is becoming increasingly evident, supporting its continuously improving position in the supply chain for highend passenger vehicles and commercial vehicles

High gross margin core business drives profitability improvement, with solid expense control. In 2025, the company’s gross margin was 53.97%, up 2.07pcts YoY, mainly benefiting from optimization of the product and regional revenue structure. In 2025, revenue from valve train precision components reached RMB615mn (+22.88%), with a gross margin of 55.70% (+1.75pcts); revenue from the commercial vehicle segment reached RMB147mn (+25.71%), with a gross margin of 63.17% (+4.77pcts), becoming a high margin growth driver; revenue from cold forged precision wire rod declined 17.56%, but its low gross margin (0.7%) had a weaker drag effect, indicating clear structural optimization results. In terms of expenses, selling expense in 2025 decreased by 7.87% YoY, while financial expense improved significantly (-RMB15.05mn, YoY profit increase 159.5%), mainly due to increased foreign exchange gains driven by RMB exchange rate fluctuations; profit growth in 1Q26 was slightly lower than revenue growth, mainly affected by higher R&D and financial expenses, while overall operations remained stable.

Strengthen material innovation and product extension, while proactively expanding into new screw products. The company has developed patented technology for phosphating treatment on stainless steel wire surfaces, laying the foundation for expanding applications of precision components across multiple fields. Leveraging its advantages in cold precision forging technology, its products have expanded from traditional steel components to new materials such as aluminum, copper, and titanium alloys, with applicat ions in electric drive systems, battery housings, and ball screws. Meanwhile, the company is actively expanding new application areas for precision components such as screws. Its subsidiary Jiuyueba has applied for 23 screw-related patents (including 10 invention patents), completed full-process development, and obtained customer recognition. As of the end of March 2026, the company has established a production line with monthly capacity of 30,000 sets of planetary roller screws, and the screw business is expected to become a new growth curve for the company.

Investment recommendation: We expect the company’s operating revenue in 2026–2028 to reach approximately RMB916mn/RMB1.048bn/RMB1.202bn, with net profit of RMB273mn/RMB312mn/RMB358mn, corresponding to PE of approximately 47x/41x/36x. Considering the company’s presence in the robotics components field may bring significant earnings elasticity, we initiate coverage with an “overweight” rating.

Sensitivity analysis: Under the optimistic scenario, the company maintains relatively fast revenue growth and further improves cost/expense control. We estimate operating revenue in 2026–2028 to reach approximately RMB922mn/RMB1.061bn/RMB1.225bn, with net profit of approximately RMB291mn/RMB335mn/RMB386mn, corresponding to PE of approximately 44x/38x/33x. Under the conservative scenario, revenue growth is slower. We estimate operating revenue in 2026–2028 to reach approximately RMB911mn/RMB1.035bn/RMB1.18bn, with net profit of approximately RMB255mn/RMB290mn/RMB331mn, corresponding to PE of approximately 50x/44x/39x.

Risks:

1. Risk of downstream demand fluctuations. The company's main business is auto parts, and its operating revenue is correlated with the sales volume of downstream vehicle models. If the vehicle sales of downstream development customers fall short of market expectations, it will impact the company's operating revenue, which will in turn affect the company's profit.

2. Risk of profitability fluctuations. The automotive industry is currently experiencing intense price competition. If the company's customers pass the price pressure on to the company and demand further price reductions, this may affect the company's profitability.

3. Risk that new business expansion falls short of expectations: There are uncertainties in the R&D and customer certification of new products such as screws. If technological iteration, intensified market competition, or slower-than-expected customer introduction occurs, the new growth curve may fail to contribute revenue as scheduled.

4. Overseas operations and geopolitical risks: Overseas subsidiaries in Europe, Mexico, and other regions have seen rapid revenue growth, but they may face risks such as geopolitical conflicts, trade barriers, changes in tariff policies, and compliance with local regulations.