Investment suggestion
On July 12, 2022, the company announced that it had completed the industrial and commercial registration procedures for the change of shares in Dongheng, Ningde, and the company already held 51% of the shares in Dongheng in Ningde. We believe that the acquisition of Ningde Dongheng and the increase of module structure business will drive the company's business transformation from equipment to equipment + products, which will help to build the company's second growth curve and make up for the short cycle and volatility of customized equipment business. In the context of the rapid development of the new energy vehicle industry, we believe that the company is expected to achieve medium-and long-term steady growth.
Reasons
The downstream of model automation is prosperous, and the profit margin is expected to increase gradually. At present, the production capacity of power battery is expanding rapidly, and the demand for module and PACK automation production line is strong. The company has strong product self-research ability and rich project delivery ability, is in a leading position in the industry, and has established a close cooperative relationship with the head battery factory and the whole vehicle factory. With the improvement of modularization and generalization, the strengthening of enterprise human efficiency management, and the increase in the contribution of European customer orders, we expect the net interest rate of equipment business to be in the upward channel. With the increase of personnel and the expansion of the plant, we expect the company to form an annual output value of 35-4 billion yuan by the end of 2023.
The module structure constructs the second growth curve, and new technologies such as CTP drive the increase of unit value. The company completed the acquisition of 51% stake in Ningde Dongheng, which is the main supplier of module components in Ningde era and has strong stickiness in cooperation with major customers. New technologies such as CTP do not abolish the module structure, and higher performance requirements increase the value of a bicycle from 8-1000 yuan to 1600-2000 yuan, doubling the growth. We estimate that the global power battery module structure market is about 5.4 billion yuan in 2021. With the increase of power battery installation and the increase of permeability of new technologies such as CTP, we expect the market space of power battery module structure to reach about 30 billion yuan in 2025.
With the transition to equipment + products, the business cycle is expected to be extended. In 2021, Ningde Dongheng's income was 904 million yuan, an increase of 118% over the same period last year, and the net interest rate reached 15.7%. We think that the future performance growth is more flexible. From the perspective of net profit, Ningde Dongheng is expected to surpass Xianhui Technology headquarters in the next three years, bringing more incremental profit contribution to the parent company. We believe that the transition to equipment + products will help to improve the overall business stability, shorten the business cycle and optimize cash rebates. At the same time, Xianhui Technology and Ningde Dongheng have strong synergy in product mix and customer resources, and we expect to achieve two-way empowerment in the future to enhance the company's comprehensive competitiveness in the power battery industry chain.
Profit forecast and valuation
Considering Ningde East Heng merge Table, we raise the 2022 EPS 2023 forecast of 11% Universe 25% to 3.38 Universe 7.14 yuan. The company's current share price corresponds to 2022 34x/16x 2023. We use segment valuation to give equipment business 20x and structural components business 2023 20x and 22x Ppace E, respectively, raising the target price by 22% to 148.35 yuan, corresponding to the company's 2022 44x/21x Pmax E in 2023, which has 27% upside space and maintains an industry rating that outperforms.
Risk
The production expansion of battery factories and vehicle factories is not as expected; the market share of equipment or structural parts is declining.