Event: on the evening of May 22, 2022, the company announced that it planned to acquire 51% of Ningde Dongheng's shares in cash from Shi Zenghui and others at a price of 816 million yuan, becoming its controlling shareholder. this acquisition constitutes a major asset restructuring. Ningde Dongheng's commitment net profit in 2022-2024 is not less than 1.5x161.7 million yuan (calculated on the basis of deducting non-recurring gains and losses).
Main points of investment
Product point of view: Ningde Dongheng main power battery precision structure, the acquisition is conducive to both sides to develop new business: Ningde Dongheng main power battery precision metal structure, its products are widely used in the shell structure of power battery modules, such as side plates, end plates and special structural requirements. (1) for pre-benefit technology, the main business of pre-benefit technology belongs to the project system, which has the characteristics of large investment in individual projects, long project construction cycle, project acceptance and slow payback. With the gradual commissioning of the power battery production line, the demand for its products is greater, the product turnover is faster and the payback is more timely. This acquisition will help to reduce the impact of equipment business payback cycle fluctuations, enrich Xianhui technology product categories, form an automatic production line + module structure two-wheel drive, and further open up the company's growth space. We estimate that the global demand for new energy vehicle module components will exceed 26 billion yuan by 2025. (2) for Ningde Dongheng: with the rise of new technologies such as CTC/CTP/CTB, Dongheng can develop more new products with the help of the technology reserve of Shanhui Technology in the field of automobile chassis.
From the perspective of customer development: Ningde Dongheng cooperates closely with CATL, and the acquisition helps to enhance the customer service capabilities of both sides: Ningde Dongheng and CALT have been engaged in battery structure services around the main customer CATL since its establishment in 2014. CATL accounts for 88% and 93% of the 2021 revenue of Ningde Dongheng 2020, respectively. (1) for Shanhui Technology: Shanhui Technology has established the strategic goal of the new energy vehicle industry, serving CATL and other power battery plants, and the acquisition of Ningde Dongheng is conducive to common service to customers such as CATL; in addition, as the production line naturally needs to be matched with parts in the later stage, the two can provide customers with an overall solution and improve service capacity. (2) for Ningde Dongheng: Shanhui technology customers are rich, automotive customers include brilliance BMW, SAIC Volkswagen, German Volkswagen, etc., auto parts customers include Ningde time, SAIC Group, etc., with accelerated expansion in Europe and the United States, on the basis of meeting the development of CATL, Ningde Dongheng can make use of the customer base of Shanhui technology to develop high-quality customers at home and abroad, and gradually reduce the risk of relying on a single customer.
Profitability perspective: Ningde Dongheng has a large scale, and the acquisition helps to enhance the profitability of both sides: Ningde Dongheng's operating income in 2021 is 900 million yuan, which is + 118% compared with the same period last year. Side panel products occupy a dominant position in terms of products: side panel products account for about 70% of revenue; end plate products account for about 14%. In 2021, the net profit of Ningde Dongheng is 140 million yuan, which is + 130% compared with the same period last year. The net profit rate of Ningde Dongheng is about 15.6%. In 2021, Ningde Dongheng's gross profit margin is 28.9%, year-on-year-0.7pct, mainly due to the rise of raw materials. Ningde Dongheng gross profit margin is higher, which is higher than that of comparable company Kodali (26.3%), etc. From a product point of view, compared with the end plate, the technical requirement of the side plate product is higher, and the side plate uses insulation technology such as module side plate film insulation process, side plate connection structure, etc., so the gross profit margin of the side plate is 33%, the end plate is 9%, and the equipment tooling is 23%. The gross profit margin of the side plate is the highest. (1) for Xianhui Technology: after the completion of the acquisition, Xianhui Technology's performance will be significantly thickened. The company's 2021 operating income will increase from 1.1 billion yuan to 2 billion yuan, which is + 82% compared with the same period last year. The net profit will increase from 70 million yuan to 140 million yuan, and + 101% EPS will increase from 0.93 yuan per share to 1.86 yuan per share, which is + 100% compared with the same period last year. (2) for Ningde Dongheng: the accumulation of experience in the intelligent production line of Xianhui technology can effectively reduce labor demand, improve product delivery capacity, improve product yield, improve operation and production efficiency, and further enhance Ningde Dongheng's profitability and comprehensive competitiveness.
Profit forecast and investment rating: without considering the thickening of the company's performance after the acquisition of Dongheng, we expect the company's 2022-2024 net profit to be 1.971,315,470 million yuan, and the corresponding share price PE is 30-19-13 times, maintaining the "overweight" rating.
Risk hint: electric vehicle sales are lower than expected; module PACK automation rate is lower than expected.