The turbocharger ushered in a leapfrog growth that exceeded our expectations. The company is currently the only A-share company
A company that produces turbochargers for mainstream passenger cars (with a 40% stake in Shanghai Lingzhong) is currently mainly supplied by BMW, Great Wall (C30, H6) and SAIC passenger cars, and is expected to enter the supporting systems of auto companies such as SAIC GM and Volkswagen in the future. The assembly rate of turbochargers for passenger cars in China was about 10.7% in 2012 and is expected to rise to about 25% by 2016. Shanghai Lingzhong turbocharger has a market share of about 12% in 2012 and is expected to increase to 25% by 2016. From 2012 to 2016, sales rose from 250000 to 1.7 million, with a compound growth rate of 61.5%. The EPS contributed to the company was 0.01,0.04,0.08,0.16 and 0.27 yuan respectively, exceeding our expectations.
Matching SAIC GM Wuling, passenger car diesel engine ushered in the spring. The fuel saving rate of passenger car diesel engine is more than 30%, which is a realistic and feasible scheme for energy saving and emission reduction of internal combustion engine at present, and the entry point of using micro-car as diesel fuel is in line with China's national conditions. The company provides 0.9L-1.9L miniature vehicle diesel engines for SAIC GM Wuling and will build production bases with a total production capacity of 400000 vehicles per year in Shanghai and Liuzhou. According to our neutral assumption: from 2014 to 2016, the proportion of SAIC GM Wuling increased from 4% to 21%, and sales increased from 60, 000 to 350000, with a compound growth rate of about 147%.
In 2013, fund-raising projects and LNG engines have been put into production, and profitability has been improved. The heavy engine of the company's technical cooperation with Austria AVL will be mass produced in the third quarter of 2013, mainly for SAIC Iveco Hongyan, Valin and Foton. The light engine was put into production in the first quarter of 2013, mainly for SAIC Chase, Jinlong and Nanjing Kowloon. The company already has the ability to produce 4L-12L LNG engines and is expected to share the rapid growth of the LNG industry. We believe that, backed by SAIC, capacity utilization will remain high, and commercial vehicle gross profit margin will be high, the company's profitability is expected to gradually improve.
Investment advice: maintain the "Buy-A" investment rating, raise the profit forecast, and raise the 12-month target price to 18.00 yuan. The turbocharger grew by leaps and bounds than expected, so we raised the company's profit forecast. Relying on the rapid development of turbochargers, diesel engines, investment-raising vehicle diesel engines and LNG engines, we expect revenue growth of 9.4%, 58.6%, 36.2% and 47.4% respectively from 2013 to 2016, and 31.6%, 53.9%, 60.2% and 51.1% of net profit belonging to the parent company, respectively. The fully diluted EPS is 0.31 yuan, 0.47 yuan, 0.76 yuan and 1.15 yuan respectively, maintaining the "buy-A" investment rating and raising the 12-month target price to 18.00 yuan, corresponding to a valuation of 24 times in 2015.
Risk tips: firewood incentive policy is lower than expected; turbocharger market is squeezed by new energy vehicles; car sales have fallen sharply; raw material prices have risen sharply.