Summary of the event: on August 12, 2022, the company announced that it planned to set up a joint venture with Deep Tianma, named Jiangsu Tianhua Automotive Electronic Technology Co., Ltd., with a registered capital of 100 million yuan, of which the company contributed 45 million yuan. The shareholding ratio is 45%, and the deep Tianma contribution is 55 million yuan, with a shareholding ratio of 55%.
During the strategic transition period, the company is deeply bundling upstream raw materials and building core competitiveness, the company is currently in the early stage of strategic transformation, the product form is upgraded from simple module to complex module, and the position of industry chain is iterated from original Tier2 to Tier1. Compared with traditional Tier1 suppliers, the company has established a long-term and stable cooperative relationship with upstream raw material manufacturers in the Tier2 stage, so it has certain advantages in upstream raw material resources. Shen Tianma, which specializes in liquid crystal display (LCD) and liquid crystal display module (LCM), is located in the upper reaches of the on-board screen supply chain and provides the company's suppliers with LCD screens, which are the core components of the car cockpit display.
In 2021, the company purchased 433 million yuan from Shenzhen Tianma, accounting for 69.91% of the total annual purchase.
This time, we will establish a joint venture with Shenzhen Tianma, which will deeply lay out the upstream raw material industry chain and join forces to build the core competitiveness of the company's Tier1 position, which is expected to accelerate the market share of the vehicle screen to continue to rise. Based on the global market of independent brand new energy vehicles, the joint venture company will establish independent research and development, testing, independent or commissioned production and sales teams to directly deliver intelligent cockpit related products and services to downstream car factory customers. it is conducive to the transformation and upgrading of the company's business to downstream car factory customers.
The effect of Tier1 transformation is beginning to show, sufficient on-hand orders drive the company's continued high performance. According to the company's report, 22Q2 achieved a net profit of 20 million yuan, + 1.1% compared with the same period last year. The revenue share of the company's 22H1 core device customization / software system development business is 65.0%, 6.0%,-0.01%, 72.1%, 13.8%, 73.1%, respectively. The volume of products with high gross margin has led to a further increase in revenue and gross profit margin, and the transformation effect of Tier1 is beginning to show. The company has frequently been designated by mainstream car factories, according to the company announcement, as of August 5, 2022, the company accumulatively from the domestic mainstream system integrators and mainframe factory has been designated project delivery amount of about 10.408 billion yuan (April 15, 2022 so far the new fixed-point undelivered amount of about 2.148 billion yuan, has delivered about 240 million yuan), the project cycle is concentrated in 3-5 years We estimate that the company's on-hand orders are expected to contribute about 2.6 billion yuan a year. At the same time, in order to meet the current production of fixed-point projects, the company's production lines in Jiaxing and Nantong are expected to be put into production this year, and the self-built main plant of 155mu is expected to be completed and put into use (the main plant will continue to expand the production lines of simple modules, intelligent modules and display systems, intelligent cockpit domain controller products and advanced auxiliary driving systems, intelligent network terminals, etc.). With sufficient orders on hand and steady expansion of production capacity, the company will further expand its business scale and provide strong support for the company to build a new generation of automotive intelligent cockpit electronic product system.
Investment suggestion: we estimate that the return net profit of the company from 2022 to 2024 is 1.45 / 180 million yuan respectively, and the PE multiple corresponding to the current market capitalization is 67x/40x/32x. Be optimistic about the valuation switch brought about by the company's transition to Tier1, and maintain the "recommended" rating.
Risk tips: the risk of chip supply shortage; the intensification of industry competition leads to the reduction of gross profit margin and so on.