This report is read as follows:
Industry standards and pricing power are expected to gradually tilt to the company, leading horizontal integration is expected to open up the growth space.
Main points of investment:
Covering and increasing holdings for the first time. It is estimated that 2017-19 EPS 1.08 EPS 1.62 PE 2.82 yuan, CAGR nearly 50%, with reference to the same industry valuation (PE average 51.6 pound PB 8.3), combining PE and PB valuation methods, based on the principle of prudence, we choose the lower PE valuation method to give 2017 51 times PE, target price 55 yuan, first coverage, increase the rating.
Industry standards and pricing power are expected to gradually tilt towards the company. ① Kaizhong Precision occupies 12% of the global share, with Bosch Group, Dechang Motor and other customers, overseas well-known motor enterprises supplier certification cycle of 2-3 years, high barriers. ② global commutator market scale of 10 billion, except Kolektor (15% share) and Kaizhong Precision, the share is less than 4%, the company's annual sales of automotive motor commutators, accounting for 17% of the global 3.4 billion, under the trend of professional division of labor in the industry, industry standards and product pricing power are expected to gradually tilt to Kaizhong.
The main technical transformation and newly increased production can continue to contribute to cash flow. Kaizhong precision commutator capacity utilization rate of more than 90%, production and sales rate of more than 100%, capacity bottleneck is highlighted. The company invests 510 million yuan to expand production, the construction period is 2 years, and the production period is 3 years. After reaching production, there will be an annual production capacity of 270 million new commutators and an annual net profit of 107 million yuan.
The integration of the leading vertical industrial chain is expected to open up the growth space. ① commutator belongs to the niche market with brush micro-special motor. Drawing lessons from the experience of leading Kolektor, vertical integration is a shortcut for commutator enterprises to break through the ceiling of the industry. ② acquired German high-strength elastic parts business with 4.3 million euros in April 16, and announced in April 17 that it would acquire auto parts assets, with an estimated transaction value of 300-400 million yuan. The industry leader has a strong ability to integrate, and vertical integration is expected to open up the growth space.
Risk hint: the risk of market expansion is lower than expected; the risk of technical route change of micro-motor.