Main points of investment
The company is a leading enterprise in China's auto parts and wheel industry, strategically promoting the development of "high-end manufacturing + automotive aftermarket service". Steel wheels are the cornerstone of the company's business, with seven wheel production bases and one tire wheel assembly base worldwide, with a domestic output of up to 14 million; through a joint venture with TMW Environmental Protection Technology Company of the United States to achieve high-end manufacturing upgrading, showing its edge in the field of environmental protection equipment. On the other hand, the company deeply ploughs the automobile aftermarket service, and works with BABA to create a new automobile retail model.
New Automobile Retail: join hands with BABA, "Auto Superman + Xinkangzhong" to create a unique closed-loop service
The volume of China's automobile market has exceeded 200 million, and it is concentrated in first-and second-tier cities. In the early years, the company tapped the development potential of the automobile post-market, established the "Auto Superman" brand, and jointly participated in "Xinkangzhong" with e-commerce giant BABA in 2018, comprehensively empowering the new ecology of the automobile post-market. The new automobile retail is divided into two parts: supply chain platform and chain stores: "Xinkangzhong" (and Tmall Station) will mainly focus on the construction of post-market infrastructure such as online platform operation and supply chain warehouse configuration standardization. Offline, store management is implemented by the "Auto Superman" platform, aiming at accurate marketing, effective diversion, big data cut in and transform high-quality service, increase customer stickiness, and form a new service closed loop combined with "online system, supply chain platform and offline stores". Compared with the traditional 4S store and "street store", the new automobile retail solves the pain point of consumers and has a competitive advantage in price, service quality and reputation.
Manufacturing business: wheel repair is imminent, environmentally friendly high-end equipment is growing rapidly
Steel wheel manufacturing is the company's traditional core business (revenue accounts for nearly 50%), with significant core technical barriers and reasonable customer structure, maintaining steady growth from 2009 to 2017, mainly benefiting from the development of overseas markets; however, wheel manufacturing fluctuates with the car cycle, revenue and gross profit are likely to decline in 2018, and the inflection point recovery point is expected to be realized in the second half of 2019. The company strategically invests in the field of EPS environmental protection equipment with a market capacity of 10 billion yuan, through the acquisition of foreign advanced technology, hiring authoritative experts and technical personnel, improving the technical level of equipment, and providing high-quality equipment for auto parts, special steel enterprises and steel processing centers. Revenue and gross profit are expected to grow at more than 100% in 2018.
Investment suggestion
The clock continues to recommend the layout of high-growth parts. According to our previously released Tianfeng automobile investment clock, the industry is currently on the dividing line between active and passive depots. We believe that the market will enter the automobile investment clock stage two and three of the "growth". At this stage, the excess return of high elasticity and high growth target in the parts plate is more obvious. With the formal establishment of the Kechuang board, it will accelerate the development of new concepts such as electric intelligence, new travel and new retail, and the plate valuation is expected to be repaired so that a "growth" style layout can be carried out in advance. Jingu shares and BABA's new automobile retail model and Jingu EPS environmental protection high-end equipment have the characteristics of high elasticity and high growth.
The company's traditional manufacturing relies on the repair of high-end equipment, and the upgrading of the market service model after the new business triggers elasticity. It is estimated that the company's revenue from 2018 to 2020 will be 27.2 (- 10%) / 26.2 (- 4) / 31.5 (+ 20) billion yuan respectively, the net profit of returning home will be 1.7 (+ 215) / 3.0 (+ 75) / 4.4 (+ 48) billion yuan respectively, and the EPS will be 0.17, 0.29 and 0.43 yuan, respectively, and the corresponding PE will be times that of 64-37-25. In view of the fact that the company has the characteristics of high elasticity and high growth in the field of automotive aftermarket services and high-end equipment, the company has been given a "buy" rating for the first time according to the segment valuation method, with a target price of 14.83 yuan.
Risk hints: raw material price fluctuation risk; automobile market downside risk; automobile aftermarket competition risk.