Main points of investment:
High-quality manufacturer of automobile stamping die, export-led to show excellent quality. The company is a large-scale independent manufacturer of automobile moulds in China, mainly for export, mainly supporting multinational auto parts manufacturers such as Magna, Qi Hao, Eslinghausen, Boze and so on, and has established a relatively stable cooperative relationship with them. The stamping parts produced by the company's mold products are finally matched to many brand models, such as Tesla, Inc., Porsche, Mercedes-Benz, BMW, Audi, Jaguar Land Rover, Volkswagen, General Motors, Ford, Chrysler and so on. On the basis of the mold business, the company has expanded the stamping parts business, mainly for the domestic market. From 2014 to 2017, the company's income compound growth rate reached 27.92%, and home net profit compound growth rate reached 28.27%. In the first quarter of 2018, the company achieved an income of 149 million yuan, an increase of 76.61% over the same period last year, and a net profit of 31 million yuan, an increase of 116.32% over the same period last year. The barriers to entry of the automobile mold industry in Europe and the United States are higher than those in China, and the product profitability is stronger. In 2017, the company's gross profit margin of stamping die reached 52.03%, while that of Tianqi Mould and Chengfei Integration was 20.55% and 20.49%, respectively.
Overseas stamping die business + domestic stamping parts business, two-wheel drive development is full of power. In the company's product income structure, stamping dies account for nearly 80%, and stamping parts account for 20%. In 2017, the company's stamping die revenue was 352 million yuan, an increase of 40.98% over the same period last year, and that of stamping parts was 79 million yuan, an increase of 24.36% over the same period last year. On the basis of the original overseas high-quality customer resources, the company has newly expanded Chrysler, North American Nissan and other vehicle factory customers to become its stamping die supplier; stamping parts business mainly has Boze and other customers. The company's "precision automobile stamping die upgrade and expansion project" will be completed and put into production by the end of 2018. In the future, the sales proportion of high-end medium and large die products such as body-in-white frame stamping dies will be further increased. The comprehensive gross profit margin of the products and the market share in high-end products will be increased. At the same time, the company has increased investment in the stamping parts business, and set up an automation department to actively open up the domestic automotive field automation production equipment market, the company has a strong driving force for future development.
The replacement of automobile funds increases the demand of the die market, and the company has obvious advantages in the export cost of automobile stamping dies. In recent years, the launch frequency of new models in the automobile market has been accelerated and the development cycle has been shortened. The development cycle of new models has been shortened from about 4 years to 1-3 years, and the modified models have been shortened from 6-24 months to 4-15 months. The continuous increase in the number of new and modified models will significantly increase the market demand for automobile moulds. Domestic automobile stamping dies have cost advantages, and the price is only about 70% and 50% of that in Europe, America and Japan. Driven by cost factors, the procurement focus of automobile moulds continues to shift from Europe, the United States, Japan and other developed countries to China and other developing countries. In 2017, China's stamping die export value was 1.124 billion US dollars, an increase of 37.75% over the same period last year. The company's export income accounted for 79.70% in 2017, of which stamping die export accounted for about 4% of China's total stamping die export. It is expected that the company's export scale will further increase in the future.
Acquire 49% stake in Weitang Warren, a holding subsidiary, and go deep into the field of stamping parts. On June 7, 2018, Weitang Industries signed a formal "equity transfer agreement" with shareholders of Weitang Warren, in which the company plans to acquire a 49 per cent stake in Weitang Warren for US $6.55 million (RMB 42 million). Weitang Warren was established as a joint venture between the company and Warren of Canada in 2013, specializing in the production and sales of stamping parts. Since 2014, it has mainly taken orders for stamping parts from domestic parts manufacturers. Witang Industries previously held 51%. Warren of Canada holds 49%. After the completion of this transaction, Weitang Warren becomes a wholly-owned subsidiary of the company, which improves the overall business decision-making ability of the company and is conducive to the expansion of the company in the stamping market.
Coverage for the first time, giving a "overweight" rating. Based on the principle of prudence, regardless of the impact of acquisition on the company's performance, it is estimated that the company's return net profit from 2018 to 2020 is 105 million yuan, 114 million yuan and 130 million yuan respectively, and the corresponding EPS is 0.67 yuan per share, 0.72 yuan per share and 0.83 yuan per share respectively. According to the closing price of 26.46 yuan on July 5, 2018, the corresponding PE is 40, 37 and 32 times respectively. The company is a few export-oriented enterprises in the field of automobile stamping dies in China, with profound background, covering it for the first time, and giving the company a "holding" rating.
Risk tips: macroeconomic and downstream automobile industry fluctuation risk; high dependence on foreign market risk; exchange rate fluctuation risk; company performance development is not as expected.
