Hongyuan Shares is a high-tech enterprise specializing in the research, development, production, and sales of electromagnetic wire. The company's products are widely applied in high-voltage, large-capacity power transformers, converter transformers, and reactors. Established in 1998, the company has evolved over the years to become a national-level "Manufacturing Single Champion Enterprise" and a "Specialized and New" small and medium-sized enterprise in Liaoning Province. In 2024, the company achieved operating revenue of 2.072 billion yuan and net profit attributable to shareholders of 101 million yuan, with three-year compound growth rates of 27.50% and 29.12% respectively, significantly outperforming comparable companies in the industry.
The electromagnetic wire industry serves as a fundamental supporting industry for multiple sectors including power, electromechanical, transportation, and communications. With global economic recovery and the rise of emerging markets, demand continues to grow steadily. China, as the world's largest producer, seller, and exporter of electromagnetic wire, has an annual production capacity exceeding one million tons, accounting for approximately 50% of global output. In the high-voltage transformer sector, China's ultra-high voltage technology leads globally, driving rapid development in the electromagnetic wire industry. In 2024, China's grid-connected wind power installed capacity reached 520.68 million kilowatts, up 18.00% year-on-year, while grid-connected solar power generation capacity reached 886.66 million kilowatts, up 45.20% year-on-year. China's continued investment in power infrastructure provides broad development opportunities for the electromagnetic wire industry.
Hongyuan Shares possesses significant competitive advantages in the electromagnetic wire industry. First, the company has customized research and production capabilities, enabling tailored production based on customer requirements for electromagnetic wire specifications, performance indicators, and specific usage conditions. Second, the company offers a diverse product portfolio covering transposed conductors, paper-wrapped wire, enameled wire, and other varieties to meet different customer needs. Additionally, through high-quality products and services, the company has established long-term stable partnerships with renowned transmission and distribution equipment manufacturers such as TBEA and XD Group. The company leads in market share for electromagnetic wire used in ultra-high voltage transformers. From 2019 to 2023, its products accounted for 24.43% and 29.63% respectively in ultra-high voltage projects tendered by State Grid and China Southern Power Grid. These advantages position Hongyuan Shares as a significant market player in the electromagnetic wire industry and establish a solid foundation for the company's future sustainable development.
Investment Recommendation: The company's operating revenue grew continuously from 2022-2024, reaching 1.311 billion, 1.461 billion, and 2.072 billion yuan respectively, with year-on-year growth of 31.10%, 11.47%, and 41.84%. Net profit attributable to shareholders also grew consistently from 2022-2024, reaching 49.9975 million, 64.4657 million, and 101.3017 million yuan respectively, with year-on-year growth of 6.25%, 28.94%, and 57.14%. Among comparable companies, Jingda Co., Great Wall Technology, and Jinbei Cable have certain similarities in product structure and application fields, with 2024 PE ratios of 29.65x, 21.66x, and 14.61x respectively, which are relatively reasonable and provide reference value for valuation. The company's post-issuance share capital is 127.329564 million shares (including over-allotment), with the issue price corresponding to a post-issuance market value (including over-allotment) of 1.168 billion yuan and a 2024 PE ratio of 11.53x, representing a discount compared to comparable companies.
Risk Warning: Macroeconomic volatility risk; core technology leakage risk; raw material price fluctuation risk; hedging risk; markup price decline risk; customer concentration risk; substitution risk; overseas sales business-related risks; exchange rate fluctuation risk.
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