LK is a leading global large-scale die-casting machines manufacturer, and the demand for these machines is strong. Tesla's innovative application of the single-piece die-casting solution has changed the development trend of the die-casting industry. The single-piece die-casting solution has various advantages such as lightweight vehicle bodies, cost saving and improved efficiency; it is now the general trend to the adopt single-piece die-casting solution. Market demand for these machines has exploded rapidly, and the penetration rate of single-piece die casting is increasing.
LK has first-mover advantages in the single-piece die-casting industry, and its position in the industry is stable. The Company is the leader in the large-scale die-casting machines industry and currently has a market share of more than 90%. The threshold for research and development of super-large die-casting machines is high; the Company has accumulated rich experience in R&D and has technological advantages in this industry. The company cooperates closely with Tesla, and may continue to make breakthroughs in single-piece die casting in the future. In addition, automobile manufacturers plan to expand single-piece die casting to other auto parts, including battery packs, subframes, shock absorber towers, etc., which will continue to enrich the demand for super-large die-casting machines.
Initiate with "Buy" and a TP of HK$18.84. We forecast that the company's revenue in FY23-FY25 will be HK$7,302 mn/ HK$9,851 mn/ HK$13,244 mn, respectively. Our TP represents 28.6x/ 20.2x/ 14.5x FY23-FY25 PE ratio and 5.1x FY23 PB ratio; the target market cap is HK$25.9 billion.