Investment highlights:
The strategic transformation of high-end manufacturing and the rapid deployment of high-quality growth companies started with the real estate business. In 2016, they entered the high-end manufacturing field through the merger and acquisition of gas generator supplier ARC, and in 2017 they merged and acquired high-quality automatic transmission supplier Bonzi again to increase high-end manufacturing again, forming a two-wheel drive pattern of real estate+high-end manufacturing. ARC's gas generator is the core component for passive safety of automobiles, and Bonzie's automatic transmission is the core component of the transmission system. The technical threshold is high. Both products benefit from automobile consumption upgrades. The future growth rate is expected to exceed the overall growth rate of the automobile industry, driving the company's performance to continue to grow.
Laying out the automobile safety business, and the upgrading of safety demand led to the 10 billion market space company to acquire ARC Group by issuing shares to lay out the automobile safety business. ARC is the second largest independent supplier of airbag inflators in the world, and is also a leader in the mixed gas generator field. Under the major trend of consumption upgrades, users' demand for driving safety is increasing day by day. In addition to the main and passenger airbags, side airbags, head air curtains, and knee airbags are expected to become mainstream configurations. Currently, multiple airbags exclusive to high-end cars are expected to sink into economy cars. In the future, the automotive safety business market space is broad, and ARC, as a leader in the mixed gas generator industry, is expected to benefit from it.
Acquire Bonzi and enjoy the double dividend of releasing its own brand and automatic transmission to replace manual transmission. The company once again increased high-end manufacturing by issuing shares to acquire Bonzie Dynamics, a world-renowned automatic transmission supplier. Bonzi has successfully developed independent brand customers such as Geely, Jianghuai, Haima, etc. by seizing market opportunities where it is difficult for its own brands to develop automatic transmissions for its own brands and has enjoyed the incremental dividends brought about by the rise of independent brands in recent years. With the continuous upgrading of automobile consumption, the big trend of automatic transmission replacing manual transmission will also bring a definite opportunity for Bonzie to increase product penetration. Therefore, Bonzi will also benefit from the double dividend of increasing the volume of its own brands combined with automatic gears replacing manual gears. Furthermore, Bonzi continues to expand its business layout and actively deploy the DCT business and NEV transmission systems to withstand the risk of a single business and prepare for the upcoming new energy wave.
Profit forecasts and investment advice
The company's business was split into gas generators, automatic transmissions, and real estate businesses to make separate profit forecasts and valuations. In 2018, the company's reasonable market value was 48.3 billion yuan, with a target price of 12.0 yuan. It is estimated that in 2018-2020, the company's EPS will be 0.47/0.54/0.62 yuan respectively, and the corresponding PE will be 22.2/19.1/16.7 respectively, covering the “increase in holdings” rating for the first time.
Risk warning: Automakers are increasing the proportion of automatic transmissions that are manufactured, causing sales in the third party market to fall short of expectations; sales of independent brands and increases in automatic transmission penetration are lower than expected.