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1. Company Snapshot

1.a. Company Description

China Automotive Systems, Inc., through its subsidiaries, manufactures and sells automotive systems and components in the People's Republic of China.It produces rack and pinion power steering gears for cars and light-duty vehicles; integral power steering gears for heavy-duty vehicles; power steering parts for light duty vehicles; sensor modules; automobile steering systems and columns; and automobile electronic and hydraulic power steering systems and parts.The company also offers automotive motors and electromechanical integrated systems; polymer materials; and intelligent automotive technology research and development services.


In addition, it provides after sales services, and research and development support services, as well as markets automotive parts in North America and Brazil.The company primarily sells its products to the original equipment manufacturing customers.China Automotive Systems, Inc.


was incorporated in 1999 and is headquartered in Jingzhou, the People's Republic of China.

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1.b. Last Insights on CAAS

China Automotive Systems' recent performance was negatively impacted by a decline in gross profit, which decreased by 14.4% year-over-year to $29.5 million in Q4 2024. This decline was driven by a 5.2% decrease in gross margin, partly offset by a 18.6% increase in net sales to $188.7 million. The company's largest subsidiary, Jingzhou Henglong, achieved a production and sales increase of 35% year-over-year in Q4 2024, but this growth was not enough to offset the decline in gross profit.

1.c. Company Highlights

2. China Automotive Systems: A Strong Q2 Performance Driven by Electric Power Steering Growth

China Automotive Systems (CAAS) reported a solid second-quarter performance, with sales increasing by 11.1% year-over-year to $176.2 million. The company's electric power steering (EPS) systems sales grew by 31.1% to $72.9 million, accounting for 41.2% of total sales. This growth was driven by a 26% year-over-year increase in EPS products from the company's Henglong KYB subsidiary.

Publication Date: Aug -17

📋 Highlights
  • EPS Sales Surge:: Electric power steering sales rose 31.1% to $72.9M, constituting 41.2% of total sales.
  • Brazilian Market Growth:: Sales in Brazil jumped 49.4% to $17.9M, driven by Stellantis demand.
  • Operating Income Increase:: Income from operations grew by 20.2% to $13M, with net income at $7.6M ($0.25/share).
  • Cash Reserves Strengthen:: Company reported $135.3M in cash/cash equivalents, or $4.48 per share.
  • Revenue Guidance Raised:: Full-year 2025 revenue target increased to $720M, up from prior projections.

Regional Performance

North American sales rose by 14.9% to $30.8 million, primarily due to higher sales to Stellantis. Brazilian sales increased by 49.4% to $17.9 million, mainly due to higher demand by Stellantis. The company's expansion in Brazil is expected to continue, with plans to add four production lines, representing a total capital expenditure of around $3.5 million.

Profitability and Cash Flow

Gross profit grew by 4.2% to $30.5 million, with a gross profit margin of 17.3%. Operating expenses decreased by $2.2 million, and R&D expenses remained stable at $8.1 million. Income from operations rose by 20.2% to $13 million, and net income attributable to parent company common shareholders was $7.6 million, or $0.25 per diluted share, significantly beating analyst estimates of $0.16.

Guidance and Valuation

Management has raised revenue guidance for the full fiscal year 2025 to $720 million, based on current views on operating and market conditions. With a strong balance sheet, CAAS has $135.3 million in cash, cash equivalents, and short-term investments, or approximately $4.48 per share, as of June 30, 2025. The company's valuation metrics, including a P/E Ratio of 4.24 and a P/S Ratio of 0.18, suggest that the stock is undervalued, which is likely why the company is buying back shares to create shareholder value.

Management's Comments

On the Q&A session, management addressed questions on income tax rates, R&D spending, and capacity utilization in Brazil. Regarding the move to the Cayman Islands, management stated that the purpose is to reduce the overall cost of being a listed company, while still reporting and being listed on NASDAQ, and continuing shareholder reward programs. This move is expected to give the business flexibility to expand globally, which is crucial given the company's growing presence in Brazil and other regions.

3. NewsRoom

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China Automotive Systems Reports 77.8% EPS Growth in the Third Quarter of 2025 and Raises Full Year Guidance

Nov -12

Source: prnewswire.com

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China Automotive Systems Signs Strategic Cooperation MoU With KYB-UMW to Advance High-End Manufacturing in Malaysia and Further Develop ASEAN Market

Nov -03

Source: prnewswire.com

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China Automotive Systems: Some Positive Developments And Some Negative Ones

Oct -24

Source: seekingalpha.com

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CAAS Introduces Rear-Wheel Active Steering Technology to Upper Mass-Market EVs in China

Oct -21

Source: prnewswire.com

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CHINA AUTOMOTIVE SYSTEMS COMPLETES REDOMICILIATION MERGER

Sep -11

Source: prnewswire.com

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China Automotive Systems, Inc. (CAAS) Shareholder/Analyst Call Transcript

Sep -10

Source: seekingalpha.com

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China Automotive Systems Announces Special Meeting of Stockholders on September 10, 2025

Sep -02

Source: prnewswire.com

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China Automotive Systems, Inc. (CAAS) Q2 2025 Earnings Call Transcript

Aug -13

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.97%)

6. Segments

Henglong

Expected Growth: 4.5%

Henglong's 4.5% growth is driven by increasing demand for commercial vehicles in China, government incentives for new energy vehicles, and the company's expanding presence in the global automotive market through partnerships and strategic acquisitions.

Eliminations

Expected Growth: 3.0%

China Automotive Systems, Inc.'s 3.0% growth is driven by increasing demand for automotive systems, government initiatives promoting electric vehicles, and strategic partnerships with OEMs. Additionally, the company's focus on research and development, cost control measures, and expansion into new markets also contribute to its growth.

Henglong KYB

Expected Growth: 4.2%

Henglong KYB's 4.2% growth is driven by increasing demand for commercial vehicles in China, government initiatives to promote domestic automotive industry, and strategic partnerships with local OEMs. Additionally, KYB's technology advancements in suspension systems and expanding production capacity also contribute to the growth.

Hubei Henglong

Expected Growth: 4.8%

Hubei Henglong's 4.8% growth is driven by increasing demand for commercial vehicles, government incentives for new energy vehicles, and strategic partnerships with leading OEMs. Additionally, the company's focus on R&D, cost control, and operational efficiency have contributed to its growth momentum.

Other Entities

Expected Growth: 3.5%

Strong demand for automotive systems in China, driven by government incentives for electric vehicles, increasing vehicle production, and rising demand for advanced safety features. Additionally, the company's strategic partnerships with major OEMs, such as FAW Group and Dongfeng Motor, have contributed to its growth.

Jiulong

Expected Growth: 4.0%

Jiulong's 4.0 growth is driven by increasing demand for commercial vehicles, government incentives for new energy vehicles, and rising market share in the Chinese automotive industry. Additionally, Jiulong's strategic partnerships with major OEMs, such as Great Wall Motor, and its expanding product portfolio of steering systems and components contribute to its growth momentum.

Brazil Henglong

Expected Growth: 4.1%

Brazil Henglong's 4.1% growth is driven by increasing demand for commercial vehicles, government incentives for electric vehicles, and strategic partnerships with local OEMs. Additionally, China Automotive Systems, Inc.'s investment in R&D and expansion of production capacity have improved operational efficiency, contributing to the growth.

Wuhu

Expected Growth: 3.8%

Wuhu from China Automotive Systems, Inc. achieves 3.8% growth driven by increasing demand for automotive parts in China, government support for the industry, and the company's strategic expansion into electric vehicle components. Additionally, Wuhu's focus on research and development, cost-effective manufacturing, and strong relationships with major OEMs contribute to its growth momentum.

7. Detailed Products

Power Steering Systems

China Automotive Systems, Inc. designs and manufactures power steering systems for passenger vehicles, commercial vehicles, and off-road vehicles.

Vehicle Brake Systems

The company offers a range of brake systems, including disc brakes, drum brakes, and brake pads, for various vehicle applications.

Seating Systems

China Automotive Systems, Inc. designs and manufactures seating systems, including seats, seat frames, and seat mechanisms, for various vehicle types.

Electric Power Steering (EPS) Systems

The company offers EPS systems that provide improved fuel efficiency, reduced emissions, and enhanced driving experience.

New Energy Vehicle (NEV) Components

China Automotive Systems, Inc. designs and manufactures components for NEVs, including electric motors, power electronics, and battery management systems.

8. China Automotive Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for China Automotive Systems, Inc. is medium due to the presence of alternative modes of transportation and the increasing popularity of electric vehicles.

Bargaining Power Of Customers

The bargaining power of customers is high due to the large number of customers and the availability of alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's large scale of operations and its ability to negotiate better prices.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the automotive industry, including high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the industry, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 29.26%
Debt Cost 3.95%
Equity Weight 70.74%
Equity Cost 16.24%
WACC 12.64%
Leverage 41.36%

11. Quality Control: China Automotive Systems, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

4.18$

Current Price

4.18$

Potential

-0.00%

Expected Cash-Flows