We expect that the mandatory national standard GB7258 "Technical conditions for Motor vehicle Operation Safety" will be revised in 2011 and implemented in 2012. According to the current draft for review, all buses with a length of more than 9 meters and trucks of more than 12 tons (including semitrailers) must be fitted with car retarders that comply with the regulations. We expect that this will expand the retarder from the field of large buses to the field of heavy trucks, and the industry space will be more than five times larger when only considering the installation of new cars.
Stock heavy trucks may also be forced to install retarders.
Previously, the market generally expected that only new cars would be required to install retarders, but according to our recent continuous research and interviews with relevant industry experts, due to the increasingly serious traffic accidents caused by heavy trucks, stock heavy trucks may also be required to gradually popularize retarders, and the potential market space will increase by nearly 25 times.
Terjia is the leading enterprise of automobile retarder in our country.
At present, the domestic car retarder market is mainly occupied by Teerjia and Telema, of which Terjia's market share is 35% to 40%, ranking first. We believe that Terga has significant advantages in technology, product performance-to-price ratio and so on. The company lays out the heavy truck field ahead of time and occupies the first opportunity in the heavy truck retarder market. After the fund-raising project reaches production in 2011, the company's production capacity will be expanded three times, and the market leading position will be more stable.
Valuation: covers the "buy" rating and the target price of 28.75 yuan for the first time.
We use the relative valuation method to value the company, give the company 13 times the average price-to-earnings ratio of the auto parts industry after the high-speed growth period at the end of 2016, and discount its market value to 2010 at a cost of 7.6% of equity capital. The company's target price is 28.75 yuan, which is 47.3% higher than the current stock price.
