Main points of investment
The performance is in line with expectations, and the growth of diversified automotive electronic products is full of momentum. In 2016, the company's operating income was 326 million yuan, an increase of 21.87% over the same period last year; net profit was 51 million yuan, an increase of 29.46% over the same period last year; gross profit margin was 41.13%, net profit rate was 15.41%, up 0.09% and 0.65% respectively over the same period last year. At the same time, the company announced that 1Q achieved operating income of 88 million yuan in a single quarter, an increase of 26.19 percent over the same period last year, a net profit of 17 million yuan, an increase of 26.02 percent over the same period last year, and a gross profit margin of 41.72 percent and a net profit rate of 18.51 percent, an increase of 0.59 and 3.10 percentage points compared with the same period last year. During the reporting period, the company's endogenous growth was strong, and the low-temperature start-up device, solenoid, air conditioning system and wire harness business all achieved high growth during the reporting period. The market share of the main business electronic throttle pedal, shift controller and electronic throttle increased steadily, and the gross profit margin and net profit margin increased quarter by quarter.
Benefiting from industrial upgrading and import substitution, there is a bright future. The Ministry of Industry and Information Technology and other three ministries and commissions issued the medium-and long-term Development Plan of the Automotive Industry, which proposes to promote energy-saving technologies such as power system, high-efficiency transmission system and automotive electronics to reach the international leading level. The company takes the automobile power electronic control system as the main business, caters to the future industrial policy guidance, and has high technical barriers. Under the background of industrial upgrading and accelerated import substitution, the company's market share in independent brands and joint venture brands is expected to continue to increase and become a domestic high-quality automotive electronics supplier.
There are enough orders and projects under study, waiting for the capacity to be released gradually. In order to meet the requirements of more new orders and technological capabilities, the number of R & D personnel increased by 51% in 2016 compared with the same period last year. The first quarterly report in 2017 revealed that the company has won 10 major orders from SAIC GM, Dongfeng, Zhongtai and Sinotruk, providing a strong guarantee for future performance growth. In the next three years, the production capacity of electronic throttle pedal, shift controller and electronic throttle will increase by 144%, 294% and 1000% respectively, and the release of capacity will bring greater flexibility to the company's performance growth.
Investment advice: we predict that the company's earnings per share from 2017 to 2019 will be 0.86 yuan, 1.22 yuan and 1.80 yuan respectively, and the return on net assets will be 14.5%, 17.9% and 22.8%, respectively. Maintain the "buy-A" investment rating, with a six-month target price of 62.00 yuan, equivalent to a market capitalization of 5 billion in 2017.
Risk hint: car sales growth is lower than expected; new capacity launch is delayed.