Soochow Securities Co., Ltd.: The market share of automotive lighting is expected to continue concentrating towards leading players. It recommends the leading domestic automotive lighting company Xingyu Co., Ltd

According to the Zhitong Finance APP, Soochow Securities released a research report stating that automotive lights, as important components related to safety, have high industry entry barriers, including customer resources, technology research and development, cost control, and quality certification. These high barriers shape an excellent competitive landscape in the automotive lighting industry. Currently, the domestic automotive lighting industry presents a competitive landscape of "two superpowers and many strong players," with Xingyu Co., Ltd. (601799.SH) and Huayu Vision leading in market share, while foreign capital also occupies a certain market share. Subsequent technological upgrades in the automotive lighting field will further concentrate market share among leading enterprises, and small automotive lighting companies may gradually fall behind in the industry transformation. The main points of Soochow Securities are as follows: The domestic automotive lighting industry currently presents a "two superpowers and many strong players" pattern, and market share is expected to continue concentrating among the leaders. Automotive lights are important components related to safety, and they also serve as aesthetic, functional, and exclusive parts. Therefore, automotive lights have high industry entry barriers, mainly including customer resources, technology research and development, cost control, and quality certification. These high barriers shape an excellent competitive landscape in the automotive lighting industry. Currently, the domestic automotive lighting industry presents a competitive landscape of "two superpowers and many strong players," with Xingyu and Huayu Vision leading in market share. Among foreign companies, Valeo, Hella, Marelli, Koito, and Stanley also occupy a certain market share. Subsequent technological upgrades in the automotive lighting field will further concentrate market share among leading enterprises, and small automotive lighting companies may gradually fall behind in the industry transformation. A decade review of the Chinese automotive lighting landscape: significant decline of Japanese brands, overall stability of European brands, and continuous rise of domestic leaders. Japanese brands, represented by Koito and Stanley, have shown an overall declining trend in the Chinese market over the past decade, primarily due to the focus on supporting the Japanese system. Since 2016, Koito has faced the separation of Shanghai Koito and a decline in domestic Japanese vehicle sales, leading to a continuous decrease in revenue and profit in the Chinese market. Particularly in the last two fiscal years, its operating profit margin in China has turned negative, and Koito has begun to reduce production capacity in China. Stanley's revenue in China is also expected to decline significantly in the 2024 fiscal year, but its profitability remains stable. European lighting manufacturers have a broader customer coverage in China, thus their overall development has been stable in recent years. Valeo and Hella's global automotive lighting business revenue has shown steady growth in recent years, with stable profitability, and they are still expanding in China (Valeo is building a new production line at its second factory in Wuhan to develop and produce high-end automotive lighting products for new energy vehicles; Hella's domestic joint venture Haina Chuan Hella (Sanhe) plans to establish an expansion project with an annual production capacity of 200,000 intelligent automotive lights and a new tail light expansion project. Fuwei Hella also achieved the completion and production of its new factory in Tianjin in 2024). Domestic lighting manufacturers, represented by Xingyu, have continued to deliver growth since their listing, with 2024 revenue surpassing Huayu Vision, becoming the domestic leader in automotive lighting. Huayu Vision's revenue has remained stable in recent years, but it is expected to decline in 2024, mainly due to the impact of the decline in joint venture brands within the SAIC system. Among the second-tier lighting manufacturers, Jiali and Liaowang still have a gap in revenue scale compared to the leaders, and their profitability is also somewhat behind that of Xingyu. In terms of capital expenditure, domestic lighting manufacturers are significantly more proactive in expansion than foreign ones, with Xingyu, Huayu, Jiali, and Liaowang all actively expanding production. This is mainly due to the continuous growth in domestic new energy vehicle sales and the increasing market share of domestic brand car manufacturers, as each domestic lighting manufacturer hopes to capture more market share in the wave of domestic substitution of automotive lights Horizontal Comparison of Domestic Automotive Lighting Players, Xingyu's Competitive Advantages Stand Out In terms of revenue, Xingyu's income scale is expected to surpass Huayu Vision in 2024; in terms of profitability, Xingyu shows significant advantages compared to both domestic and foreign competitors; in terms of expansion, Xingyu maintains a good pace of steady capacity expansion; in terms of R&D, Xingyu continues to invest heavily in R&D to strengthen its technological capabilities, with industry-leading experience in large-scale mass production of high-end automotive lighting projects. Investment Recommendation: Recommend the Leading Domestic Automotive Lighting Company Xingyu Co., Ltd. Recommendation Logic: 1) Space: Automotive lighting is a high-quality component sector with continuous iteration and upgrade capabilities, and the ongoing intelligent upgrades of automotive lighting drive the ASP and industry space to continue growing. 2) Landscape: High barriers create an excellent competitive landscape for automotive lighting, and Xingyu's industry position has been continuously improving over the past few years. 3) Customers: Currently, the company has deep partnerships with leading new energy/new force customers such as Huawei Smart Selection, Chery, Li Auto, Geely, and North American electric vehicle companies, binding with top customers allows the company to continuously benefit from the concentration of the passenger car industry towards leading players. Profit Forecast: It is expected that the company's net profit attributable to the parent will be 1.761 billion, 2.189 billion, and 2.683 billion yuan for 2025-2027, corresponding to PE ratios of 20 times, 16 times, and 13 times. (PE corresponds to the closing price on July 14, 2025) Risk Warning: Passenger car industry sales may fall short of expectations, automotive lighting technology iteration and upgrades may not meet expectations, and competition in the automotive lighting industry may intensify