Although the automobile spring is small, it is an indispensable accessory for industrial manufacturing and automobile manufacturing.
As one of the largest private spring companies in China, Huawei Technology has become an indispensable member of the rapid development of the automobile industry.
According to Chairman Jin Lei, "If you sit in your own private car, there may be hundreds of Huawei springs silently serving you." ”
On May 16, 2023, Huawei Technology was officially listed on the main board of the Shenzhen Stock Exchange with an issue price of 28.84 yuan. In 2023, the company achieved a total operating income of 1.243 billion yuan, a year-on-year increase of 39.63%, and a net profit of 155 million yuan, a year-on-year increase of 53.43%.
Unfortunately, despite the company's outstanding operating data, the stock price is still hovering around the issue price.
Looking forward to the future, what are the incremental factors of Huawei Technology that can make a small spring into a big business?
Spring "Little Giant"
Spring is a kind of mechanical parts that use elasticity to work, as a general component, spring application fields involve various fields of the national economy. Among them, aerospace, rail transit, automobiles, construction machinery, robots and other application fields have more stringent requirements for the use environment and performance indicators of spring products, and usually only spring companies with strong technical strength can become their qualified suppliers.
Since its establishment, Huawei Technology has been mainly engaged in the R&D, production and sales of mid-to-high-end elastic components, including suspension springs, brake springs, valves and special-shaped springs, stabilizer bars, etc.
At present, there is no authoritative statistical data on the market share of spring products in the open market. In view of the fact that the company's main product suspension springs are mainly used in domestic passenger cars and a small amount are used in the automotive aftermarket, the market capacity of the company's suspension spring products is calculated on the basis of the released domestic passenger car production data.
Based on the calculation of 4 suspension springs for each passenger car, the market share of the company's suspension springs is calculated as follows without considering the automotive aftermarket:
According to the certificate issued by the Spring Branch of China Machinery General Parts Industry Association, the company is a well-known manufacturer of springs and related products in China's spring industry, and its comprehensive strength ranks among the top three in the domestic spring industry.
In 2023, the improvement of Huawei's profitability is mainly due to the two-wheel drive of revenue and gross margin growth. Among them, the company's main suspension springs achieved revenue of 752 million yuan, a year-on-year increase of 37.82%, stabilizer bars achieved revenue of 264 million yuan, a year-on-year increase of 101.28%, and brake springs achieved operating income of 122 million yuan, accounting for 60.50%, 21.26% and 9.81% of the company's operating income respectively.
From the perspective of the overall customer structure, the company's top five customers are BYD, Geely, FAW East Machinery, Nanyang Xixiao, and Great Wall.
In 2023, the top two customers, BYD and Geely, will achieve sales of 366 million yuan and 166 million yuan respectively, an increase of 71.68% and 38.7% year-on-year, respectively, accounting for 29.43% and 13.35% of the company's revenue, and BYD's proportion will increase by 5.50% year-on-year.
In BYD, the company's suspension springs account for about 70%, and the stabilizer bar is in the climbing stage, currently accounting for more than 10%. In Geely, because there are two types of suspension spring supply methods, the proportion of suspension springs is similar to that of BYD, and the stabilizer bar is about 30%.
For 2024, Huawei Technology's customer development plan is, on the one hand, the self-increment of old customers such as BYD, Changan, Chery, etc., and on the other hand, the new development of foreign-owned, joint venture, and new power brands. It is reported that the company is in relevant contact with Xiaomi Automobile.
In addition, Huawei Technology began to rely on reliable product quality to develop the international market, and in 2023, it won the designated project of Stellantis, achieving a new breakthrough for overseas customers and laying the foundation for the company's internationalization path.
Three major increments can be expected
In Jin Lei's view, "spring is an industrial industry, and auto parts are just one of the categories. The company's fastest growing industry in the past two years is the automobile industry, but our philosophy is not to over-concentrate a product in an industrial chain, just like the concept of not putting eggs in the same basket, we need to diversify risks, make the entire industrial structure safer, and make the risk of fluctuations in a certain industry relatively weakened. ”
Looking to the future, a major increment of Huawei Technology lies in the income elasticity of rail transit, industrial robots, agricultural machinery and other fields.
At present, Huawei Technology has established cooperation with ABB, one of the well-known robot companies, in the field of industrial robots. The springs supplied by the company to industrial robots are mainly installed in balance cylinders, which are equivalent to a lever to reduce the demand for motors and power, and there are also some small springs. The supporting part of the industrial robot company is about 1,000 yuan in a group. In the future, the field of industrial robots is expected to become a new business growth point for the company.
Secondly, the stabilizer bar will still be a major increment point for Huawei Technology in 2024.
Springs and stabilizer bars belong to the functional parts of the automobile chassis, and the materials used are basically spring steel, and the underlying logic of the technology has a certain commonality. The spring and stabilizer bar are similar in the main processes, such as forming, heat treatment, shot blasting, surface coating and other process technology, and there is great similarity in process logic.
It is reported that 4 suspension springs are needed on a car, and the price of a traditional fuel vehicle is between 130-200 yuan. Stabilizer bar needs to be used on a car before and after two, the price of traditional fuel vehicles is between 120-160 yuan, new energy vehicles compared with traditional cars, its curb weight increases, so the value of a single car has increased by 20-30%.
From the perspective of gross profit margin, in 2023, Huawei Technology's gross profit margin will be 27.38%, a year-on-year increase of 3.47%, of which the gross profit margin of suspension springs will be 30.51%, a year-on-year increase of 4.87%, and the gross profit margin of stabilizer bars will be 17.32%, a year-on-year increase of 5.70%.
Huawei Technology said that the stabilizer bar was in the stage of R&D investment in the early stage, involving a long development cycle and high R&D expenses, which also led to its gross profit margin. However, the stabilizer bar has begun mass production, and the income of the stabilizer bar is on the rise, with a very fast increment and growth rate, and will continue to grow. Under the influence of economies of scale, the gross profit margin will gradually move closer to the spring.
In addition, Huawei Technology is also giving full play to its own technical advantages and actively expanding the business of its core product, coil springs.
On the one hand, relying on the sales growth of existing major customers such as BYD, Geely, Great Wall and other car companies, the company's shipments have continued to increase; on the other hand, the company's materials and processes are outstanding, not only attaching importance to the development of spring steel wire materials, but also forming a series of process technologies, Huawei Technology is expected to accelerate the domestic substitution process of the spiral spring industry with its strength.
According to the record of investor relations activities publicly disclosed by Huawei Technology, the company has added two new stabilizer bar production lines in 2023, and four more production lines will be mass-produced in 2024.
Among them, the "annual output of 9 million new energy vehicle stabilizer bars and an annual output of 100,000 sets of robots and construction machinery spring construction projects" is expected to be completed by the end of 2025. During this period, some production capacity will be released one after another.
Huawei Technology said that the production capacity construction of valves and special-shaped springs is continuous, and the production capacity has increased compared with the past. At present, the company's focus is still on suspension springs and stabilizer bars, and after the subsequent production capacity of suspension springs and stabilizer bars is balanced with demand, it will further expand the production of other categories.