Recommendation logic: the company is affected by the decline in domestic car sales, Sino-US trade war and other factors, short-term performance pressure, unfavorable factors are expected to be alleviated. In the medium and long term, on the one hand, the company continues to enrich its product line, with a compound growth rate of 242% and 186% in revenue from electric pumps and transmission pumps from 2015 to 2018, and on the other hand, the Asian market share of NVH business is only 1%, which is expected to cooperate with the company to develop the Chinese market. The company's performance is expected to grow at a compound rate of 49% in the next two years.
After the development of steering pump market and commercial vehicles, it is expected to remain stable. The company's market share in the steering pump field is stable at about 30%, the passenger car field EPS to replace HPS is the general trend, the company's commercial vehicle pump income proportion has increased year by year, and has established long-term and stable cooperative relations with domestic and foreign complete machine manufacturers such as Cummins, Zaifu, GM, Nissan, Dongfeng Motor, FAW Group, SAIC Group, Shaanxi Automobile, heavy truck, SAIC Hongyan Commercial vehicle and other domestic and foreign manufacturers. The market share in the domestic heavy truck dump truck field is more than 40%. In the face of the huge holding market of traditional energy vehicles, the company has made great efforts to develop domestic and foreign afterloading markets, turning to the main business of pumps or maintaining stability.
The product line continues to be rich, laying out the field of automotive electronics. The company actively enriches the product line, electro-hydraulic pumps, gearbox pumps and other products have been mass-produced, convertible bonds raise funds for the gradual release of products to ensure the supply of follow-up orders.
Among them, the compound growth rates of revenue from electro-hydraulic pumps and transmission pumps from 2015 to 2018 were 24.2% and 186% respectively. The transmission oil pump has been designated by mainstream independent brands such as Great Wall Motor and Geely transmissions, and the release of orders is expected to lead to a rebound in gross profit margins of related businesses. At the same time, the company actively distributes the field of automotive electronics, including keyless entry and startup system PEPS, ADAS, body domain controller. Among them, PEPS has achieved mass production and won the fixed points of Isuzu, Jiangling Ford and SAIC Hongyan.
With the coordinated layout of the Chinese market, the development potential of NVH business is considerable. In 2017, the company completed the acquisition of CCI, CCI is a world-renowned provider of sound insulation and thermal insulation solutions. CCI's main markets are concentrated in Europe and North America, while Asia and China account for only 1 per cent of revenue. At the same time, the net interest rate of CCI is about 4%, which has more room for improvement compared with domestic NVH manufacturers. CCI actively implements the strategy of "localized production". At present, it has set up factories in Langfang and Shenyang, and set up R & D centers in Shanghai, which provides good convenient conditions for further opening up the Chinese market and providing quality services to customers.
Profit forecast and investment advice. It is estimated that the EPS of the company from 2019 to 2021 will be 0.79 RMB1.31 and 1.74 respectively, and the company's performance will grow at a compound growth rate of 49% in the next two years. For the first time, coverage gives an "overweight" rating.
Risk hints: risks such as lower-than-expected automobile production and sales, intensified trade war between China and the United States, and sharp fluctuations in raw material prices.