Event
The company issued a buyback plan on May 9, 2019: it intends to use its own funds or self-raised funds to buy back some of the company's public shares (A shares) in a centralized bidding transaction, and the total repurchase capital is not less than 200 million yuan (inclusive). And not more than 400 million yuan (inclusive), the repurchase price does not exceed 16.00 yuan per share (inclusive) If calculated according to the maximum amount of repurchase funds and the upper limit of the repurchase price, the total amount of repurchased shares is expected to be about 25000000 shares, accounting for about 2.47 per cent of the current total share capital of the company. The implementation period of this share repurchase shall be within 12 months from the date of consideration and approval of the repurchase plan by the general meeting of the shareholders of the company.
Comment
Firmly optimistic about the company's "manufacturing + automotive aftermarket service" two wings development prospects. The purpose and use of this buyback is: based on the confidence in the future development prospects and the recognition of the inherent investment value, combined with the company's operating situation, financial situation and future profitability, the company intends to use its own funds or self-raised funds to buy back the company's shares in order to promote the company's share price to match the intrinsic value.
Manufacturing business: steel wheel gross profit margin is stable, EPS environmental protection high-end equipment is growing rapidly. The steel wheel manufacturing business is cyclical, the prosperity of the automobile industry is depressed in 2018, while the company's steel wheel business sales are nearly flat (2018 annual plate revenue of 1.39 billion yuan, year-on-year). The customer structure is reasonable and the ability to resist risks is strong; the gross profit margin of steel wheels in 2018 is maintained at 20%, reflecting the company's core competitiveness in this field. EPS environmental protection high-end equipment market capacity of nearly 10 billion, the company through the United States TMW company to master the core technology, strong scarcity, 2018 annual plate revenue exceeded 150 million yuan (year-on-year + 44%), gross profit margin as high as 48%, is expected to maintain rapid growth in the next 1-2 years.
The new retail business in the automotive aftermarket: the digital forerunner of the "Xinkangzhong + Auto Superman" industry. In 2018, the company strategically reorganized its supply chain business, which accounted for a large proportion of its automobile Superman revenue, with BABA, Tmall Station and Kangzhong auto parts related business, to establish "Xinkang Public"; after the strategic merger, Xinkang Zhongzhong became the infrastructure builder of the industry mainly by providing online traffic and supply chain warehouse capacity; after stripping the supply chain business, the automobile Superman, through the means of information digitization, enabled the transformation of offline auto repair stores. With the continuous expansion of Auto Superman stores and the development of technology-driven industry platform, the new auto retail model will give the sector greater flexibility; after reducing supply chain and diversion costs, Auto Superman is expected to be profitable for the whole year 2019.
Investment suggestion
The company shows its leading value in the automotive aftermarket, and the manufacturing end of EPS high-end environmental protection equipment is growing at a high speed. Profit forecast: it is estimated that the return net profit of the company from 2019 to 2021 is 40 million yuan for 3.0 PE and 0.44 yuan for PE, respectively, and 0.53 yuan for PE in 2021, corresponding to the times of 28-19-16. We use the segment valuation method to estimate that the target market value of the company is 15 billion yuan (2.4 billion yuan for steel wheel manufacturing / 4 billion yuan for environmental protection equipment / 8.6 billion yuan for new retail sales of cars), maintaining the "buy" rating and the target price is 14.83 yuan.
Risk hints: raw material price fluctuation risk; automobile market downside risk; automobile aftermarket competition risk.