Investment logic
Focus on BMS, cross-border new energy vehicles and energy storage strategy growth. The company is a PCB supplier mainly distributed in the field of new energy vehicles, accounting for 46% of automotive electronics revenue in 2021, with a compound growth rate of 36.0% and 36.2% of revenue and return net profit in three years. The company mainly focuses on the BMS system (battery management system) related to new energy vehicles, and participates in the development of energy storage products, and is expected to enjoy the growth dividend brought by automobile electric intelligence and rapid energy storage penetration at the same time.
Automobile electric intelligence brings three times the value of bicycles, and the compound growth rate of energy storage continues to grow by 64%. 1) Automotive electric intelligence. According to Tesla, Inc. Mode 13, we estimate that the PCB value of a bicycle is about 1490,1640 yuan, which is three times that of traditional cars. 2) Energy storage penetration. According to GGII forecast, the global installed capacity of all kinds of energy storage will reach 576GWh in 2025, with a compound growth rate of 64%. Among them, BMS is a key component of the energy storage battery system, and we estimate that the value of PCB for energy storage will reach 8.1 billion yuan in 2025.
The frontier layout occupies the first opportunity for development, and the growth rate exceeds that of the leader. Compared with other comparable companies, the company has more competitive advantages: 1) the proportion of automotive electronics has reached 46%, and the product layout is mainly BMS, which is deeply involved in the high-speed development of new energy vehicles, and is expected to be successfully expanded to the energy storage sector in the future. 2) deeply bound to Ningde era (the company's supply share is 60%, and Ningde indirectly holds 7.19% of the company's equity through Changjiang Morning Road). With the help of key customer effect, the company's BMS products have been extended to high-quality customers such as Guoxuan Hi-Tech and Funeng Technology, and have been extended to the field of energy storage, supporting Ningde era and Paineng Technology to enjoy energy storage growth dividends.
Fundamentals are under pressure to reverse the trend, and profitability has improved significantly. Under the macroeconomic pressure this year, in the first three quarters of 2022, the company achieved revenue of 1.13 billion yuan (year-on-year + 18.87%) and return net profit of 98 million yuan (year-on-year + 35.90%), gross profit reached 20.61% (3022 rings higher than 1H22 3.53pct), net profit reached 8.72% (3022 rings higher than 1H22 2.45pct), it can be seen that the fundamentals of the company are running well, under the upstream raw material price reduction trend. The recovery trend of profitability is obvious. The new energy sector of earnings forecast, valuation and rating is facing rapid development opportunities. Through IPO, the company has raised 1.15 billion yuan to build a new production capacity of 1.2 million square meters per year (37.79 million shares at an issue price of 30.38 yuan per share, 360 million yuan more than the planned fund-raising project). We estimate that the company's net profit from 2022 to 2024 will reach 1.3 PE 2.2 / 330 million yuan, corresponding to 35X/21X/14X. Combined with the comparable company's PE level, we give the company 27 times PE in 2023, corresponding to the target market capitalization of 6 billion yuan and the target price of 39.78 yuan per share.
Risk hint
Demand is lower than expected; competition intensifies; raw material price reduction is less than expected; exchange rate fluctuation risk; risk of lifting ban on restricted shares