Revenue increased 27.9%, maintaining the “buy” rating
In 2021, Aiko Lan achieved revenue/net profit of 866 million yuan/69.67 million yuan, +27.9%/-44.4% year on year, and Guimu's net profit was lower than Huatai's forecast of 61.3% (forecast: 180 million yuan). 1Q22 revenue/net profit to the mother was 230 million yuan/13 million yuan, +22.6%/-58.2% over the same period last year. We expect net profit attributable to the parent for 2022-2024 to be 146/295/464 million yuan, the corresponding EPS is 1.82/3.67/5.77 yuan, giving 2022 19.3x PE (referring to comparable companies that the average PE value expected by wind in 2022 is 19.3x), with a target price of 35.13 yuan/share (previous value: 90.00 yuan/share, based on 40x PE in 2021) to maintain the “buy” rating.
Profitability declined in stages in the early stages of the transition to Country 6
The National Six Emission Standard for Motor Vehicles was fully implemented on July 1, 2021, promoting an increase in the proportion of China's six exhaust gas aftertreatment products in the company's sales product structure. Revenue in 2021 was +27.9% year on year, and gross margin was -12.8 pp to 23.1% year on year. The main reasons were: 1) the procurement cost of raw materials was high, and the large-scale effect was not yet reflected; 2) the proportion of self-produced parts in the middle and late stages of the country's five post-processing products was lower; 3) the proportion of gasoline engine post-processing products with low gross margins increased in the company's overall revenue structure; 4) the restructuring and scrapping or impairment of the country's five products. The cost rate was +1.5pp compared to the previous year, of which the management cost ratio was +2.6pp compared to the previous year, mainly due to the acquisition of ABF, which increased acquisition costs, and the R&D expenses ratio was +0.3pp compared to the previous year. Together, the above factors affected the year-on-year decline of 10.8 pp to 7.7% in 2021.
Expect an increase in product sales from Country 6 and African Country 4
In 2021, the company's national six standard gasoline and diesel engine aftertreatment products were sold in batches, and the number and quality of customers increased significantly. In terms of ship exhaust treatment, supporting supply to leading customers such as CSIC Anchai/Zhenjiang Shipyard/Weichai Heavy Machinery has been achieved. The National Six Motor Vehicle Standard was fully implemented in July 2021, driving up the volume and price of post-processing in China. We estimate that in 2022, the market space will exceed 90 billion yuan/yoy +7.2%. The company is leading the market development and technology research and development, and is expected to achieve rapid growth. Furthermore, the four non-road national standards will be implemented in December 2022. The company has carried out product pre-research and calibration tests with many customers in the non-road field, which is expected to contribute new growth points in the future.
Maintain the “buy” rating, with a target price of 35.13 yuan
With the full implementation of motor vehicle country 6 and the imminent implementation of national non-road standards, the company's main products are expected to experience a sharp rise in volume and price. Due to the high upfront costs of Guo6 products, the large-scale effect has not yet been reflected. We lowered its gross margin forecast, then lowered the 2022-2023 net profit forecast to 146/295 million yuan (previous value: 347/548 million yuan), and introduced net profit of the mother to the mother in 2024 of 464 million yuan. Referring to the company's 2022 Wind unanimously expected an average PE value of 19.3x, giving the company 19.3x PE in 2022, with a target price of 35.13 yuan/share, maintaining the “buy” rating.
Risk warning: the risk of implementation of industry policies falling short of expectations, the risk of a decline in the prosperity of the automotive industry, the risk that the company's product certification progress falls short of expectations, and the risk of fluctuations in raw material prices.