Event

On August 21, Aug. 21, Aotejia released its 2018 semi-annual report. The company's cumulative operating income in the first half of the year was 2.22 billion yuan, down 17.43% from the same period last year. The net profit attributed to shareholders of listed companies was 235 million yuan, up 27.18% from the same period last year. Net profit attributable to shareholders of listed companies was 76 million yuan, down 58.24% from the same period last year.

Brief comment

Air conditioning compressor business is not as expected, looking forward to overseas business volume in 2019.

In the first half of 2018, operating income was 2.22 billion yuan, down 17.43 percent from the same period last year; operating costs were 1.826 billion yuan, down 13.62 percent from the same period last year; net profit from home was 235 million yuan, up 27.18 percent from the same period last year; and gross profit margin was 17.71 percent, down 3.62 percent from the same period last year. Of this total, operating income in the second quarter of 18 was 1.169 billion yuan, down 10.39 percent from the same period last year; operating costs were 953 million yuan, down 7.27 percent from the same period last year; and gross profit margin was 18.55 percent, down 2.74 percent from the same period last year, narrowing the decline in Q1. During the reporting period, Nanjing Autejia demolition compensation received 181 million yuan in asset disposal income, thickening the company's first-half performance.

The subsidiaries of 1H18 sold a total of 3.4 million automotive air-conditioning compressors of various types, down 15.84% from the same period last year. The operating income of the compressor business reached 1.436 billion yuan, down 16% from the same period last year, mainly due to the slowdown in the growth rate of the domestic automobile industry and the upgrading of domestic automotive products, resulting in a decline in the overall demand for fixed-displacement compressors. At the same time, Air conditioning International, a wholly owned subsidiary, was affected by the offline production of some old models and the switching of new models. 1H18's business income was 492 million yuan, down 32.88% from the same period last year. Affected by the rise in raw material and labor costs and the decline in capacity utilization caused by the suspension of production by some customers, the gross profit margin of the company's compressor business fell 5.3 percentage points to 20.16%. The company expects to start its PSA European CMP project from the end of 2018 to 2019, and the air conditioning international and UK Jaguar Land Rover projects will gradually supply, which is expected to achieve a rebound in overseas business growth.

Vigorously expand the business of new energy vehicles and transform thermal management system suppliers

As the core component of the air conditioning system of new energy vehicles, electric compressor will be an important growth point of the company's business in the future. The company has supplied bulk products to BYD and BAIC New Energy since April 2018, with sales of 43388 and 39451 2Q18 new energy vehicles respectively, ranking among the top two in the domestic market, consolidating the company's leading position in the domestic electric compressor market. In addition, the company regards the thermal management system of new energy vehicles as the focus of future business development. The company develops air conditioning and thermal management systems for NIO Inc. Automobile ES 8, which has been mass-produced and delivered, with sales of 1331 vehicles in July and orders for more than 17000 vehicles. At the same time, the company provides new energy bus battery pack cooling system for Ningde era. 1H18 Ningde era's main bus customers account for nearly 50% of the new energy bus market. Sales of major customers continued to grow in the second half of the year, which is expected to lead to the rapid development of the company's new business.

Acquire Guodian Seth to achieve epitaxial growth

Based on the main business of automotive air conditioning, the company has horizontally expanded to the field of new energy vehicle power supply. The company issued a transaction plan on August 2, which intends to buy 100% equity of Guodian Seth by issuing shares (60%) and paying cash (40%). The transaction amount is initially set at 728 million yuan, with a value-added rate of more than 7 times, which has yet to be examined and approved by the Shenzhen Stock Exchange. Guodian Seth is mainly engaged in the application products based on the two-way conversion technology of power electronics, including the two-way power supply of lithium battery separation equipment and battery pack testing equipment. Customers include Tiantian Industrial, Hangke Technology, Dingli Intelligence, Nebula Electronics and other major domestic lithium battery charge and discharge equipment manufacturers, the products have entered the lithium battery factories such as Ningde era, BYD, Guoxuan, Lishen, Tesla, Inc. and so on. Vehicle-mounted bi-directional charger, in a leading position in the industry, supporting Weima cars and tested by BAIC, Geely and other passenger car factories; vehicle-mounted bi-directional DC/DC converter. Guodian Seth's net profit of deducting non-return in 2017 is 42.1898 million yuan, and it is promised that the net profit of deduction in 2018,2019 and 2020 will not be less than 50 million yuan, 59 million yuan and 73 million yuan respectively. As Ningde Times, BYD and other lithium battery factories continue to expand battery capacity, as well as vehicle charger upgrading, two-way charger replacement of one-way charger, supporting product sales are expected to continue to increase, becoming a new growth point of the company.

Investment suggestion

It is estimated that the company's EPS will be 0.15,0.18 yuan respectively from 2018 to 2019, and will be given a "neutral" rating according to the company's pre-suspension closing price corresponding to PE24X and 20X.

Risk hint

The growth of the automobile industry has slowed; the development of the new energy vehicle market has fallen short of expectations; the trade war between China and the United States has led to higher tariffs on export products; and acquisitions have fallen short of expectations.