Company profile: Starting with chemicals, expanding lithium batteries, and expanding the new energy market, Bailey Technology was founded in 1992. The company has been deeply involved in the chemical field for many years and has rich engineering experience. The company's motherboard was listed in 2016, and Bailey Lithium Battery was acquired in 2017, and it began switching from traditional chemical EPC to lithium battery EPC and lithium battery equipment circuit. Currently, the company focuses on providing technical services for the construction of new energy smart factories. Its business scope includes engineering consulting and design, lithium battery material production lines, lithium battery equipment sales and general engineering contracting. Among them, the company's lithium battery material production line business mainly relies on Bailey lithium batteries. It has extensive experience in the fields of lithium battery positive and anode materials, precursor production line technology and equipment. The company cooperates closely with leading lithium battery companies such as Ningde Shidai, Dangsheng Technology, and Yiwei Lithium Energy. It is the dark horse of lithium battery EPC and is expected to take advantage of the vast new energy market and achieve rapid development. Furthermore, the shareholding ratio of the company's controlling shareholder has declined in recent years, driving the pledge rate to decline simultaneously, and the risk of the company's equity pledge has been clearly mitigated.
Company business: The lithium battery business opens a second growth curve. The volume and price are expected to rise sharply in the future. The company's forward-looking layout before demand for lithium batteries explodes, has now formed an overall solution for the entire industry chain from planning and design, production line equipment, and technical operation and maintenance. In 19-21, the company's lithium battery business achieved revenue of 690, 1.20 billion and 840 million yuan respectively, accounting for 49.3%, 85.1%, and 80.6% of total revenue respectively. The lithium battery business has developed rapidly in recent years. Considering: 1) the company signed a new lithium battery EPC order of 2.11 billion yuan in '21, which will be carried over centrally in '22; 2) 22H1 company signed a new EPC order of 1.37 billion yuan, which is expected to be repaired after the epidemic has abated, which will drive up revenue in '23; 3) 21-22Q1's prepayment items were 170.360 million yuan respectively, compared with +702% and +1824% respectively, indicating a surge in the company's equipment, materials, and outsourced orders, thereby driving revenue growth; 4) the company accelerated the deployment of the lithium battery equipment sector, further improving Product self-supply ratio, which in turn drives improvement in gross margin; the company's lithium battery business has opened a second growth curve, and volume and price are expected to rise sharply in the future.
Company advantages: Benchmark projects, high-quality customers, huge room for in-depth expansion, and the company's management team is experienced. Compared with traditional EPC companies, the company's skilled and highly educated employees account for a relatively high proportion. The company has been deeply involved in the lithium battery field for many years, built a number of benchmark projects at the Ministry of Industry and Information Technology and provincial levels, and established a quality reputation in the industry. The key customers are basically well-known enterprises in the industry. Looking at the customer structure, the sales share of the company's top five customers declined markedly in 18-21, which meant that the ability to withstand market fluctuations was further improved. At present, the company's business continues to expand vertically, starting with the EPC turnkey model. Through independent R&D or outbound mergers and acquisitions, the self-supply ratio of equipment is increased, the added value of products is increased, and profit margin levels are raised. Furthermore, it is expected that after establishing R&D advantages of lithium battery equipment and manufacturing process advantages, the company has the potential to achieve core raw material production in the fields of silicon carbon anodes, solid electrolytes, hydrogen fuel cells, etc., thus once again breaking through the ceiling of growth space.
Investment advice: Lithium battery EPC dark horse, taking advantage of the wind to expand the new energy market, covering it for the first time, and giving it a “strong push” rating
The company laid out the lithium battery business in a forward-looking manner and began switching from traditional chemicals to lithium battery EPC and lithium battery equipment tracks.
Currently, the company's lithium battery business has plenty of orders, and the share of self-supplied equipment with high gross margins continues to rise. It is expected that there is potential to achieve core raw material production in the lithium battery field in the future and continue to break through the growth ceiling. Based on its own R&D and process advantages, the company has fully enjoyed the dividends of the explosion in demand in the lithium battery industry, and is expected to maintain long-term and rapid growth in the future. We expect the company's earnings per share forecast for 2022-24 to be 0.52, 0.67, and 0.86 yuan respectively. The corresponding PE is 30.5, 23.5, and 18.4 times. Referring to the average valuation of the lithium battery equipment industry in 2022, we value the company 40.5 times and give it a target price of 21.0 yuan, covering it for the first time and giving it a “strong push” rating.
Risk warning: The lithium battery market has declined beyond expectations, and the company's expansion rate has fallen short of expectations