Automotive seals are used to fill gaps, absorb and reduce vibrations, insulate sounds, provide access to moving parts, and compensate for errors in sheet metal fabrication and assembly. Automotive sealing systems can be divided into body sealing systems (automotive sealing strips) and component sealing systems according to their uses.
(1) Automobile weatherstrip: with customized attributes, used in doors, windows, engine covers, trunk covers, sunroofs and other parts, with sealing, sound insulation, dustproof, waterproof, shock absorption, decoration and other functions, for improving the comfort and safety of driving in the car, protecting the car body and interior parts have an important role.
(2) Parts sealing system: used for engine system, transmission system, brake system, electrical system, fuel system and other auto parts sealing, shock absorption, sound insulation, including sealing rings, oil seals, gaskets, sealing covers, shock absorbing elastic elements, etc.
Where to use automotive weatherstrips
According to the composition of raw materials, automotive sealing strips can be divided into plastic sealing strips (with PVC particles as the main raw materials), rubber sealing strips (with EPDM rubber compounds as the main raw materials), thermoplastic elastomers (such as TPE, TPV, etc.) sealing strips, etc. 78% of the materials used in automotive weatherstrips are EPDM, 20% PVC and 2% elastomeric thermoplastics.
Foreign-funded enterprises occupy a leading position in the automotive sealing strip market, and there is a broad space for domestic substitution.
(1) Global market: Cooper Standard, Hutchinson, Toyoda Gosei, Nishikawa and Haldex together account for 71% of the global automotive glass guide trough market.
(2) Domestic market: In 2015, the main 33 companies accounted for about 95% of the market share of the automotive sealing strip industry, of which the market share of foreign-funded and joint ventures was about 63%, and the market share of domestic enterprises was about 32%.
Automotive seals are customized, and molds are developed separately for each new model. Due to the introduction of domestic production and the introduction of a mature supply system for the joint venture models, most of the market share is still occupied by foreign seal suppliers. In recent years, some joint venture car companies have reduced costs by increasing procurement of independent automotive sealing strip enterprises. Zhejiang Xiantong and other independent automotive sealing strip companies continue to make progress in terms of technology accumulation, cost control and response speed, and are expected to benefit from the trend of domestic substitution under the pressure of cost reduction of OEMs and increase market share.
The company is deeply involved in the automotive weatherstrip industry. Founded in 1994, the company has nearly 30 years of experience in R&D, production and service of automotive weatherstrips. From 2022 to 2023, through two share transfers, the actual controller of the company was changed from Mr. Li Qifu to Taizhou Wucheng (a holding company of Taizhou State-owned Assets Supervision and Administration Commission)
According to the use of parts, the company's automotive sealing strip products can be divided into door frame sealing strips, door sealing strips, door internal and external water cutting, windshield exterior rubber strips, triangular window glass sealing strips, trunk sealing strips, door glass guide troughs, sunroof sealing strips, roof trims, decorative strips, etc.
According to the raw materials, the company's automotive sealing strip products can be divided into rubber sealing strips (with EPDM rubber compound as the main raw material), plastic sealing strips (with PVC particles as the main raw material), etc. In addition, the company manufactures metal roller presses such as door glass rails and sliding door slides, as well as other accessories such as luggage rack gaskets.
In 2022, the company's rubber sealing strip/plastic sealing strip sales volume will be 8,749/16.12 million meters, respectively, a year-on-year increase of +15%/-1%.
In 2022, the unit price of the company's rubber sealing strips/plastic sealing strips will be 8.2/11.5 yuan/meter, respectively, a year-on-year increase of +7%/+6%.
In 2022, the company's rubber sealing strips/plastic sealing strips/metal roller parts and other accessories/other business revenue will be 7.2/1.9/0.03/0.30 million yuan respectively, accounting for 77%/20%/0.4%/3% of the revenue respectively.
In 2022, the gross profit margin of the company's rubber sealing strips/plastic sealing strips will be 25%/40% respectively, a year-on-year increase of -7.4pct/-0.1pct.
According to the company's 2023 semi-annual report, the company's main customers include FAW-Volkswagen, SAIC-Volkswagen, SAIC-GM, Geely Automobile, Changan Automobile, SAIC, GAC, FAW, Chery, Changan Mazda, Great Wall Motor, Webasto, SAIC-GM-Wuling, etc.
From 2018 to 2020, the automotive industry was sluggish, with a decline in sales of car companies and a decline in the sales of automotive seals, resulting in a decline in revenue. From 2020 to 2022, the company's revenue increased from 620 million yuan to 940 million yuan. From 2021 to 2022, the company's net profit attributable to the parent decreased from 140 million yuan to 130 million yuan, mainly due to the increase in raw material prices.
Most of the raw materials of automobile sealing strips are derivatives of crude oil, and the important raw material EPDM rubber is priced in US dollars, which has a high correlation with international crude oil prices. According to the company's prospectus, the main raw material of rubber sealing strips, ethylene propylene diene monomer (EPDM) and its rubber compounds, account for about 40% of the material cost, and the main raw material of plastic sealing strips, plastic particles (PVC particles), account for more than 30% of the material cost. In 2023Q1-3, the company's net profit attributable to the parent company in a single quarter was 0.30/0.23/043 million yuan, a year-on-year increase of -16%/+9%/+29% respectively. The company's net profit attributable to the parent company in a single quarter in 2023Q3 increased rapidly year-on-year.
As of June 30, 2023, the company has 8 invention patents and 22 utility model patents related to core technologies. In the field of rubber formulation, the company's high-hardness rubber and low-density sponge production technology has reached the domestic leading level; The company is also leading in rubber vulcanization technology, modular development technology, three-dimensional molding technology, seamless interface technology, surface pre-coating technology, surface flocking technology, rubber mixing process technology, CAE analysis synchronous development technology, length control technology, etc. Automobile sealing strip products have high requirements for safety, environmental protection and durability, and the company strictly controls product quality and pays attention to improving the performance of products.
In 2022, the company completed the procurement, configuration and upgrading of more than 200 pieces of equipment, including the procurement or layout of seven rubber extrusion lines, four press island areas, and key production islands/production lines such as servo-controlled three-dimensional forming island areas and CNC milling machine island areas;
Actively adopt new robot automation equipment, connect each circulation station through the form of suspension chain assembly line, improve the level of automation, greatly improve efficiency and reduce costs;
Four new frameless automotive sealing strip automatic spraying lines have been put into operation, using advanced double-sided spraying and manipulator operation, which doubles the work efficiency;
Newly purchased a high-end rubber mixing production line made in Germany, with a production capacity of 15,000 tons, which greatly increased the company's rubber mixing capacity of high-end automotive sealing strips;
The introduction of 360 intelligent section surface detector, online coating thickness gauge, thermal tape machine and other intelligent equipment to further ensure the quality and stability of high-end products;
The MES system is promoted to self-made molds and equipment manufacturing, improving the utilization rate of manpower, equipment, materials, and design standard resources, realizing information interconnection and data sharing between design, process, manufacturing, inspection, logistics and other links, and significantly improving the level of intelligent manufacturing.
Pay attention to cost control, and actively explore new products + new customers
The company has the ability to make molds, which can effectively reduce costs and shorten the product development cycle.
According to the company's 2022 annual report, the company's tooling and mold self-made rate has reached more than 90%, and the advantages of self-made molds include:
(1) Reduce costs and improve product gross profit margins.
(2) Shorten the design and manufacturing cycle of the mold, and the cycle of outsourcing the customized processing mold is about 2-3 times that of self-made.
(3) to ensure the continuity of production, in the process of testing and using the mold, once the problem is found, the company with the ability to develop the mold can quickly solve the problem.
Benefiting from the trend of consumption upgrading, frameless sealing strip products are expected to increase rapidly
According to the company's investor relations activity record form (20231103), the company currently cooperates in the development of 7 frameless model sealing strip projects, including a model of Volkswagen Aodi, ZEEKR 001, ZEEKR 007, two models of Chery and Huawei, a model of BAIC and Huawei, and a new energy model of SAIC-GM, of which the ZEEKR 001 project will be mass-produced in 2021Q4, and other projects will be mass-produced in 2023-2024.
According to the company's investor relations activities record (20231103), the company's current production capacity is about 1.8 billion yuan, some of which are used as trial production of new products, and the company's production capacity is expected to reach about 2.5 billion yuan within three years. At present, the company is applying for about 88 acres of land in the north of the company, in addition to the expansion and construction of the logistics center and mold center, the rest of the main expansion of the production capacity of frameless sealing strips.
The joint venture + new energy customers are expanding smoothly and are expected to contribute to the growth momentum
When the company went public in 2016, its customers mainly included domestic brand OEMs such as SAIC, GAC, Geely, Chery, and Changan, as well as a small number of joint venture brand OEMs such as SAIC General Services and SAIC-GM-Wuling.
Since 2018, the company has actively explored joint venture customers such as FAW-Volkswagen, Dongfeng Nissan, and SAIC-Volkswagen, as well as new energy models from customers such as SAIC, Zeekr, Chery, SAIC-GM-Wuling, Changan, BAIC, and SAIC-GM, and new projects have continued to land. In 2022, the company's top five customers accounted for 53% of revenue, a year-on-year decrease of 24pcts.
The company's new energy vehicle division was established in November 2021. In 2023H1, the company's new energy vehicle seal revenue was 55 million yuan, accounting for 12% of the revenue. A number of new energy vehicle projects developed by the company are expected to start mass production in 2024, which is expected to fully benefit from the high prosperity of new energy vehicles and achieve rapid growth in sales revenue to new energy customers.
The company's core technology reserves such as material formula and production process are sufficient, with mold self-made ability, and industry-leading gross profit margin. The company's high value-added products are frameless seals to cater to the trend of automobile consumption upgrading, and there are currently 7 projects jointly developed, including ZEEKR, Chery Huawei, BAIC Huawei, Volkswagen Audi, SAIC-GM, etc., which are expected to usher in a large-scale period in 2024. The company's joint ventures and new energy customers are expanding smoothly, and it is expected to benefit from the trend of domestic substitution under the pressure of cost reduction of OEMs and increase market share.
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