Report guide

Silicon Xiang plans to invest 700 million yuan to build a manufacturing headquarters to support long-term development; equity incentives fully mobilize the enthusiasm of core cadres; the layout of energy storage and temperature control is flexible; and maintain “buying.”

Key points of investment

Si Xiang invests in manufacturing headquarters to support sustainable development

The company announced that the holding subsidiary Dongguan Si Xiang plans to sign the “Dongguan Si Xiang Power Battery Thermal Management and Automotive Electronics Manufacturing Headquarters Project Investment Agreement” with the People's Government of Wangniudun Town, Dongguan. It plans to use its own capital of 700 million yuan to invest 700 million yuan in the construction of the power battery thermal management and automotive electronics manufacturing headquarters project, including fixed asset investment (including buildings, structures and ancillary facilities, equipment investment, land prices, etc.) of no less than 120 million yuan.

Dongguan Si Xiang (51% Holdings) is currently on a rapid growth channel, with revenue of 834 million yuan in 2021 up 147% year on year, and net profit of 74.23 million yuan (9.44 million yuan has been calculated for excess performance rewards), up 67% year on year.

The company continues to actively expand production capacity. In 2021, the production capacity of power battery thermal management products and new energy vehicle electronics manufacturing products was 75 million pieces and 6.5 million pieces, with capacity utilization rates of 94% and 96%, and production capacity under construction of 60 million pieces and 5 million pieces respectively, with production expansion rates of 80% and 77%. The total construction area of this manufacturing headquarters project is about 168,000 square meters, and the construction period of the project is 24 months, which will further support the company's continuous development.

Equity incentives fully mobilize the enthusiasm of core cadres

The company released the “2022 Restricted Stock Incentive Plan (Draft)”, which plans to grant 3.371,56 million restricted shares to 21 directors, senior managers, and core cadres, accounting for about 1.20% of the total share capital, with a grant price of 4.80 yuan per share.

The performance assessment target is based on net profit in 2021. The net profit growth rate for 2022-23-24 will not be less than 25%, 50%, 80%. Net profit is the numerical value after deducting non-return net profit and excluding the influence of equity incentives. Assuming that the company grants restricted stocks in June 2022, it is estimated that the total cost of restricted stocks from 2022 to 2025 will be 17.3 million yuan, and 667, 749, 265, and 500,000 yuan will be amortized respectively in 2022-23-24-25.

Profit forecasting and valuation

Si Xiang continues to upgrade its products, expand its customers, and growth expectations are optimistic; new business layouts such as energy storage, temperature control, and liquid cooling are flexible; demand in the UHV and offshore wind power sectors is expected to increase in the future; it is estimated that in 2022-2024, net profit of the mother is 1.10, 171, and 224 million yuan, corresponding to PE 25 times, 16 times, and 12 times, maintaining the “buy” rating.

Risk warning: Increased competition led to lower gross margins; orders for pure water cooling equipment fell short of expectations, etc.