Key takeaway

The company recently received a motor semi-assembly order worth nearly RMB2bn from UAES, with mass production starting in 3Q26. This could potentially "create another new energy main business" on the revenue side, and the higher per-vehicle value after semi-assembly volume ramp-up is expected to further unlock profit upside. Longsheng's emerging business segments are also seeing accelerated breakthroughs. Micro Research Zhongjia, a leading domestic aerospace component supplier, doubled its revenue in 2025 and achieved profitability. The recent successful launch and recovery of the Long March 10B is expected to serve as a key inflection point for accelerating commercialization of China's commercial aerospace sector. Zhongjia is anticipated to continue benefiting from the industry boom, driving both performance and valuation improvement for the company.

Event

1) The company announced that its holding subsidiary Wuxi Longsheng New Energy Technology Co., Ltd. recently received a project desgin win notification from United Automotive Electronic Systems Co., Ltd. (UAES), designating it as the supplier for "stator assemblies in separated motors and rotor components in separated motors."

2) On July 10, the launch and first-stage recovery mission of the Long March 10B carrier rocket was successfully completed. This mission marks China's first successful controlled recovery of a carrier rocket first stage and the world's first net-based carrier rocket recovery, signifying a historic breakthrough in reusable rocket technology for China.

Quick Take

Main business secures RMB2bn semi-assembly order from UAES, set to contribute significant performance increment in the future. Subsidiary Longsheng New Energy has been designated by United Automotive Electronic Systems (UAES) as the supplier for "stator assemblies in separated motors and rotor components in separated motors." According to the design win notification, the project has a 3-year lifecycle with estimated total revenue of approximately RMB2bn, corresponding to annualized revenue of nearly RMB700mn, equivalent to "creating another new energy main business." Mass production will commence in 3Q26, with significant incremental contributions expected from 2027 onward. The UAES project design win represents a critical breakthrough for the company's new energy core semi-assembly business, strengthening the depth of cooperation between Longsheng and its existing core customer UAES, while securing high-quality endorsement from a leading domestic electric drive Tier 1 in the semi-assembly field. After mass production begins, it will continue to drive order volume growth for Longsheng's motor core component supply business, while creating synergies with Micro Research Precision's stamping processes and production line resources to reduce costs, improve efficiency, and optimize product delivery.

Longsheng has proactively positioned itself in cutting-edge fields such as satellites and rockets, with its commercial aerospace earnings and valuation upside potential being underestimated. Longsheng's holding subsidiary, Micro Research Zhongjia, is the operating entity for the aerospace business segment, with products including satellite solar panel hinges, drive assemblies, hold-down and release mechanisms, attitude control mechanisms, and antenna mechanisms. Since 2024, Zhongjia's business revenue has continued to grow rapidly. In 2026, the company's business undertaking volume will increase by 4 to 5 times compared to 2025, with ample designated orders on hand, and production capacity will be significantly enhanced during the year. Zhongjia started with GW satellite business and has accumulated comprehensive first-mover advantages in technology, production capacity, and customer relationships through high-precision machining and over 10 years of longterm cooperation, achieving a market share as high as 80%. After entering the commercial aerospace sector, it has closely partnered with the star unicorn GalaxySpace, achieving mass supply and being selected as an "Outstanding Supplier." It also maintains stable cooperation with multiple research institutes under China Aerospace Science and Technology Corporation and China Aerospace Science and Industry Corporation, as well as clients like Beijing Wutian Technology. In addition, Zhongjia has entered fields such as rocket engine control valves and has joined the supply chains of leading companies like LandSpace and Space Pioneer. The satellite supply chain is far more closed than that of automotive components, making supplier replacement costs higher and profitability more attractive. Moreover, all satellites are standardly equipped with solar panel products, and the usage of hinges per satellite is still increasing. In 2025, Zhongjia will achieve a doubling of business revenue and realize profitability, driven by sales structure optimization and the gradual release of production capacity. With the certainty of demand volume growth, advantages of a high market share position, product matrix expansion, and sufficient production capacity reserves, Zhongjia's performance is about to growth substantially, which is expected to drive both the earnings and valuation of Longsheng higher.

Investment recommendation

The company is a dual leader in EGR and motor core businesses, with robust order backlogs across all operations. Its EGR business will benefit from the recovery of commercial vehicles and the accelerating penetration of hybrid passenger vehicles. After establishing a plant in Chongqing, it has deeply bound itself to SERES, accelerating the upgrade of the motor core business toward semi-assemblies. Frontier businesses such as humanoid robotics and commercial aerospace are making accelerated breakthroughs, offering considerable earnings and valuation upside as industry trends accelerate. We estimate the company's net profit attributable to shareholders of the parent company to reach RMB300mn in 2026 and RMB350mn in 2027, implying 25x and 22x PE at the current share price. We maintain buy rating.

Risks:

1. Industry prosperity falls short of expectations. The domestic economy is expected to recover in 2026, but the specific pace remains uncertain, and automotive industry demand may fluctuate accordingly. The implementation effect of trade-in policies for automobiles and other consumer goods may be limited, and the pace of recovery in domestic auto market demand could slow.

2. A worsening competitive landscape in the industry. With domestic and foreign parts suppliers aggressively expanding, technological advancements, and new capacity coming online, future industry competition may intensify, potentially affecting the company's market share and profitability.

3. Slower-than-expected client expansion and mass production of new projects. The company is accelerating customer development, but due to fluctuations in automakers’ new model development cycles, there may be timing-related volatility in project nominations. In addition, new capacity ramp-up could be delayed by uncontrollable factors, resulting in slower-than-expected mass production progress.