The steady growth of auto parts business is in line with the development trend of automobile lightweight: Huazhong car, founded in 1993, is an auto body parts manufacturer and currently has 18 production bases throughout the country. The company's revenue in the first half of 2016 was 800 million, an increase of 5% over the same period last year. Among them, automotive structural parts and decoration accounted for 75%, moulds and tools accounted for 5%, air-conditioning shell accounted for 11%, non-automotive products accounted for 5%, and sales of raw materials accounted for 4%. Structural and decorative parts include: front / rear bumper, ABCD column, trunk cover, car battery box, dashboard and so on. Its products are not only suitable for traditional fuel vehicles, but also can be used in new energy vehicles. We expect the traditional business to maintain steady growth of more than 10% in the future, because 1. Although China's automobile market has entered a period of micro-growth, the development trend of automobile lightweight will not change, and plastic instead of steel is the common choice of the whole automobile factory. Huazhong maintains close and long-term cooperative relations with customers, such as FAW-Volkswagen, Shanghai GM, Changan Ford and so on. two。 The commissioning of the new plant will bring new long-term orders. Changsha and Qingdao factories will be put into production in the second half of 2016, and Tianjin factories will be put into production in 2017. 3. Customer base expansion, with the rise of SUV models, Huazhong began to supply its own brands.
Join forces with TNAV to jointly develop car networking: in October 2014, Huazhong Holdings established a joint venture with US listed company Taiwei Information (Taiwei) to vigorously develop vehicle networking and become an one-stop enterprise from equipment production, sales to service provision. When Zhonghua has perfect sales channels and manufacturing experience. Taiwei Information has excellent Internet technology, focuses on the development of navigation and interconnection one-stop solutions, rich experience in smart vehicle preloading, and maintains long-term cooperation with Ford, Chrysler and Toyota in the United States. Taiwei's on-board system has been designated by General Motors Co as the exclusive technology for new models in North America from 2017 to 2018.
With a bright future, the vehicle networking business is expected to enter the vehicle factory supply system: the vehicle networking project will be officially launched in 2016 for product sales. Huatai has reached an agreement with new energy car companies to supply 500000 sets of TBOX in three years, which will help Huatai to build a networking platform. Huatai car screen with a number of car companies to carry out supporting experiments, the future is expected to enter the pre-installation market and become an exclusive supplier.
Cover for the first time and give a "buy" rating: currently in the Hong Kong stock market, auto parts companies have an average forecast price-to-earnings ratio of 15.6 times and 12.8 times for 2016 and 2017, while Huazhong vehicle valuations are 12.9 times and 10.5 times, lower than those of their peers. Considering that the company's products are in line with the trend of replacing steel with plastic and lightweight cars, the traditional business will maintain steady growth in the future. Coupled with the car networking as a new growth point, with the delivery of products, the huge value of the data platform will gradually display, resulting in an increase in valuation. Finally, we gave the company a target price of HK $1, corresponding to a price-to-earnings ratio of 16.8 times in 2016 and 13.5 times earnings in 2017, which is 33% higher than the current price.
Risk hint: sales of online car products are not as expected; product recall
