Incident: On July 30, the company's official account revealed that the German subsidiary of Xianhui Technology received a large order from the European automobile giant group.
Key points of investment:
European customers placed another large order, and the company's automation strength was evident. In May of this year, after the German subsidiary of Xianhui Technology received an order for the next generation NEV module PACK equipment from a European luxury car brand, it went back to the next city after a lapse of two months. As an international benchmark for high-end automation enterprises “made intelligently in China”, Xianhui laid out in Europe in the early years and had manufacturing plants in Germany. It has been deeply involved in the German automobile supply chain for many years, and the production line automation rate it provides has reached the highest level in the world. The company has not only been able to seamlessly connect with customers in terms of language and culture, but has also won high recognition from European customers through continuous innovation in technology. In the bidding process for this project, Xianhui Company, as the only Chinese company selected, finally stood out after many rounds of competition, once again demonstrating the company's strong automation capabilities.
The acquisition of 51% of Ningde Dongheng Machinery's shares came to fruition, and Dongheng Machinery's performance is expected to increase in '22. Established in 2014, Dongheng Machinery has been providing related battery structural parts services around its main customer, Ningde Shidai. The products include side panels, end plates and special structural parts. Following the rapid expansion of production capacity demand in the Ningde era in recent years, the company achieved revenue of 904 million yuan in 2021, an increase of 118% over the previous year, and net profit of 142 million yuan, an increase of 129% over the previous year. In 2020-2021, Ningde Era accounted for 87.63% and 92.99% of the company's revenue respectively, making it an excellent supplier for Ningde Era. At present, Xianhui Technology has completed the registration procedure for the change of shares to business, and the company already holds 51% of Ningde Dongheng's shares. According to the company's inquiry letter, the purchase order amount for module end plates and module side panels related to the Ningde era obtained by Dongheng Machinery from January to May 2022 was about 765 million yuan, accounting for 85% of Dongheng Machinery's revenue in 2021. Dongheng Machinery's performance is expected to increase in '22.
With a strong alliance between Xianhui Technology and Dongheng Machinery, the modular structural parts business is expected to open the company's second growth curve. Xianhui has cooperated with many power battery manufacturers including CATL to help customers establish and transform intelligent power battery production lines. Dongheng Machinery supports CATL's main products. After cooperation between the two parties, they will jointly serve battery manufacturers such as CATL. Since the production line naturally needs to be matched with parts later, including tasks such as changing tooling jigs and aligning production lines as products are updated, the two parties can collaborate more effectively and communicate more effectively to provide customers with optimal solutions as a whole. The two sides can create synergies in various areas such as customer development, resource maintenance, and internal productivity improvement. Xianhui Technology can further expand product types and obtain new profit growth points. Dongheng Machinery will also use Xianhui Technology's customer resources to enhance market recognition, improve operational efficiency through intelligent upgrading of production lines, and use capital platforms of listed companies to broaden financing channels and enter the fast track of development.
Maintain profit forecasts and maintain “buy” ratings. Net profit attributable to the mother in 22-24 is estimated to be 241, 443, and 622 million yuan respectively. The current stock price corresponding to PE in 22-24 is 37X, 20X, and 14X respectively, maintaining the “buy” rating.
Risk warning: risk of NEV sales falling short of expectations; risk of increased market competition, etc. The company received an inquiry letter from the Shanghai Stock Exchange on the asset restructuring draft on June 8, requesting clarification and additional disclosure of: 1) evaluation of forecasts and goodwill; 2) target company customer and business information; 3) target company financial information; 4) transaction arrangements; and 5) the positioning and synergies of the Science and Technology Innovation Board. The company responded to the above questions on July 5. The relevant information in the report on Dongheng Machinery comes from company announcements, reminding investors to pay attention to the latest developments and the company's official information.