On Wednesday, Jefferies initiated coverage on Bethel Automotive Safety Systems Co (603596:CH), a company specializing in the automotive chassis industry, with a Buy rating and a price target of RMB64.00. The firm's coverage begins with a positive outlook on the company's growth potential in the braking-by-wire market and its expansion into other automotive segments.
Bethel Automotive, established in 2004, holds approximately 8% of the disc brake market share and around 12% in the Electric Parking Brake (EPB) market in China. Jefferies predicts that the company's penetration in the braking-by-wire market will increase significantly, expecting a rise to 65% by 2026, up from 35% in 2023.
The analyst notes that Bethel Automotive has commenced mass-delivery of one-box products, which are projected to hit sales of 1.5 million units by 2025, capturing an 8% market share in China. The report also highlights the company's Lightweight business as a potential growth driver, bolstered by strong orders from international Original Equipment Manufacturers (OEMs) such as General Motors (NYSE:GM) and Stellantis (NYSE:STLA), along with increased production capacity in Mexico.
Jefferies also points to the company's advantages, including scale, recognized product quality, deepened know-how, and rapid response to OEM demands, as factors that will contribute to Bethel's expansion beyond the braking segment. The firm anticipates that Bethel Automotive could grow into steering and air-suspension segments, becoming a mega-chassis company supported by a strong localization trend in China.
The financial institution projects a Compound Annual Growth Rate (CAGR) of 27% for the company's top-line and 26% for the bottom-line over the period from 2024 to 2026. This optimistic forecast is based on a multiple of 27 times the estimated 2025 earnings, which aligns with the five-year average.
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