Matters:
The company acquired 51% of Zhihang New Energy's shares for 1.01 billion yuan in September 2016, and recently acquired the remaining 49% of the shares for 1.08 billion yuan, achieving a wholly-owned ownership of Zhihang New Energy. On December 20, we investigated Zhihang New Energy. Our comments on this are as follows:
Comments:
Polyester industrial wire faucet, wholly-owned acquisition of Zhihang New Energy, successfully entered the field of new energy. The company was founded in 2003 and listed on the small and medium board of the Shenzhen Stock Exchange in 2010. It has long been committed to R&D, production and sales of industrial filaments and industrial textiles. The main products are polyester industrial wire, rubberized hard wire, soft wire rope, hose yarn, curtain cloth, and special engineering canvas. The company currently has a production capacity of 300,000 tons of polyester industrial yarn, second only to Zhejiang Ancient Fiber Road, ranking second in the global industry, and is a leading enterprise in the global polyester industrial yarn industry. The company acquired 51% of Jiangsu Zhihang New Energy's shares with 1.01 billion yuan in cash in September 2016, entering the field of power batteries for new energy vehicles. In December 2017, the company continued to step up its efforts to lay out the new energy power battery business, acquiring the remaining 49% of the shares for 1.08 billion yuan. After that, Zhihang New Energy will become a wholly-owned subsidiary of the company.
Benefiting from electronic logistics vehicles, Intelligent Aviation's performance grew rapidly. Zhihang New Energy currently has a production capacity of 1 million 2.6Ah batteries per day (about 3.5 GWh/year). The product is 18650 cylindrical. The product process of this model is mature, the consistency is high, and the cost advantage is obvious. With strong support from its parent company, Zhihang New Energy rapidly expanded its products and successfully entered the market. According to True Lithium Online statistics, Zhihang New Energy's lithium battery installed capacity in September, October, and November ranked fifth, ninth, and tenth in China. The cumulative installed capacity from January to November 2017 was among the top ten in the industry, and the upward trend was rapid. Currently, its products mainly supply new energy special vehicles. Its main customers include Yantai Shuchi, Zhongzhi Yiche, FAW, Dongfeng Motor, etc., all of which are automakers with the highest production and sales rankings for new energy special vehicles. Zhihang New Energy's revenue for the full year of 2016 was 650 million yuan and net profit was 144 million yuan; in the first three quarters of 2017, operating income reached 1.1 billion yuan and net profit was 190 million yuan, bringing rich performance contributions to the company.
Participated in Nissan's battery acquisition and participation in Wuhan Zhongyu to improve the power battery business layout. In August 2017, the company announced a joint venture with Jinshajiang Capital to acquire Nissan Battery. Nissan Battery is the world's leading soft pack battery company, which mainly supplies power batteries for Nissan's best-selling electric model Leaf. If the company expands the soft-pack automotive power battery industry in the future, it is expected that Nissan Battery's technology will be grafted to enhance its production and R&D capabilities in the field of automotive power batteries, enhance its overall competitiveness, and promote the company's sustainable and healthy development. Furthermore, the company held 25% of Wuhan Zhongyu's shares through a capital increase in April 2017. Wuhan Zhongyu is a leading hydrogen fuel cell company in China. It is committed to the application of hydrogen fuel cells and hydrogen energy-related technology in drone power systems and vehicle power systems. This time, it took a stake in Wuhan Zhongyu Company and entered the fuel cell field on the basis of lithium batteries, further improving the company's layout in the NEV power battery industry.
The increase in executives' holdings shows confidence. The company issued an announcement in May 2017. Based on full confidence in the company's future development prospects, combined with a reasonable judgment on the company's stock value, the company's middle and senior managers Weng Zhonghua (Chairman of the Company), Zhou Fazhang (Chairman of the Holding Company), Liu Yingping (Chairman of the Participating Company), Lu Bin (Director of the Company's Financial Director), and Lai Jianqing (company director) plan to increase the company's stock holdings within the next 12 months. The total increase in holdings is no less than 1.03 billion yuan, no higher than 1.53 billion yuan. As of December 19, the company has announced the progress of increasing its holdings six times, and the amount of increase in holdings has reached 1.06 billion. The increase in the company's senior holdings shows full confidence in the company's development and favors the company's long-term development.
Risk Factors:
New energy vehicle policies fluctuated; sales of new energy vehicles fell short of expectations, and prices of raw materials fluctuated.
Investment advice:
We predict that the company's EPS in 2017/18/19 will be 0.77/1.24/1.46 yuan (0.42 yuan in 2016), and the company's current price is 33.82 yuan, corresponding to 44/28/23 times PE in 2017/18/19, respectively. Considering that the company's power batteries will benefit from the continued high growth of the NEV market, as well as the company's outlook and positive product and capacity layout, the business is on the rise, and profits are expected to increase dramatically. Combined with the industry's average valuation level, we think the company's reasonable valuation is 30 times PE in 2018, covered for the first time, and given an “increase in holdings” rating, with a target price of 37.2 yuan.