Valve industry leading enterprise, market share industry third company is the main business of automotive engine intake and exhaust valve production and sales, is one of the domestic engine valve industry leading enterprises, market share is located in the industry third, the total product model of more than 10,000. Customers include nearly 20 famous domestic vehicle and main engine manufacturers such as Cummins, Dachai, Xichai, Weichai, etc. Export products cover Europe, the United States, most of the car models of Japan.

Valve industry has broad development prospects, the company's future growth space is large

In 2013, the production and sales of automobiles reached 22.168 million and 21.9841 million, respectively, up 13.53% and 14.34% year on year. According to the China Association of Automobile Manufacturers, China's automobile production and sales will break through 24 million units in 2014, with a year-on-year growth rate of about 8.5%. The future development of China's automobile industry is still promising, and valve demand is positively correlated with automobile production and sales. Based on this, we conservatively forecast that the target market capacity of the company's products in 2014-2015 will be 651.65 million and 668.86 million, which is 14 times of the company's capacity (45 million) after investment and expansion, indicating that the company's future market space is still large.

The company's competitive advantage is obvious, the future sustained growth can be expected

The company has outstanding advantages in technical level, product quality and management mode. The company has industry-leading technology level, products have obtained ISO/TS16949 international automotive industry quality system and Cummins, Dachai and other famous domestic and foreign oems strict certification; Participated in the formulation of JB/T 6012.2-2008, GB/T 23337-2009 and other national standards for valve industry; The management of the company is experienced, and the core management has worked in the company for nearly or more than 20 years. The company has a unique flexible production mode and advanced MMES production management system, to ensure the advantages of flexible production scheduling; Since 2003, the company's products have been involved in the field of military automotive engines, demonstrating the excellent products of the company; In 2013, the company successfully developed the supporting business of Caterpillar and other international construction machinery giants, and will develop rapidly in the high-end construction machinery products market in the future. Multiple advantages ensure continued growth in the future.

Earnings forecast and valuation

Assuming the issuance of 23 million new shares, we forecast the diluted earnings per share of the company's total capital stock in 2013-2015 at 0.4, 0.5 and 0.57 yuan. Compared with the valuations of comparable companies, we believe it is reasonable to assign 17-19 times 2014 P/E to the company, corresponding to a reasonable value range of 8.5 to 9.5 yuan.

Risk tips: overseas market risk; Trade friction risk; Risk of rising costs of raw materials; Energy supply and transport risks.