Focus on automotive hub bearings for 20 years to maintain high-quality development
The company is a leading supplier of automotive hub bearings in China, focusing on the production of the first, second and third generations of automotive hub bearing units and all kinds of precision bearings, accounting for 97% of the revenue of automotive hub bearing units.
The company is mainly oriented to overseas aftermarket, mainly North American market, accounting for 64% of overseas revenue.
After years of ploughing, the company's operating income increased from 280 million yuan in 2012 to 560 million yuan in 2019, with a compound growth rate of 10.6 percent, and net profit increased from 40 million yuan in 2012 to 210 million yuan in 2019, representing a compound growth rate of 29.6 percent. At the same time, the company maintains strong profitability, with a gross profit margin of 45% and a net margin of nearly 40% in recent years, maintaining high-quality growth.
Deep ploughing after-sale market, overseas expansion has yielded fruitful results
Europe and the United States is the most mature automobile market in the world, with a large number of cars, a long age and a strong demand in the aftermarket. The domestic after-sales system is still based on 4S system, and the independent after-sales system is still in the early stage of development. Therefore, the company focuses on the overseas aftermarket, with the United States as the main battlefield. After 20 years of hard work, the company's products have entered AutoZone, NAPA, Advance and WJB among the well-known auto parts chains in the United States through traders and independent brand manufacturers, and established good cooperation with well-known foreign parts manufacturers such as Huimen, Skyford and Delphi. Overseas income increased from 170 million yuan in 2012 to 360 million yuan in 2019, a compound growth rate of 11.3%. At present, the concentration of overseas hub bearing AM market is still low, and the company's products will continue to expand into the market share by virtue of high performance-to-price ratio, and is expected to maintain a growth rate of about 10% in the future.
From 1. 0 era to 2. 0 era, OEM opens up huge growth space. In the era of 1. 0, the company has achieved rapid growth in the AM market. Years of technology and experience have enabled the company to enter the OEM market. The company began to expand into the OEM market in 2017, and now it has become a supplier of commercial vehicles and passenger vehicles such as Hande Axle, Valin Automobile, Southeast Automobile, brilliance Automobile, etc., entering BAIC's B-point supply, obtaining the designated BYD commercial vehicle, and actively contacting with other mainstream joint ventures and independent vehicle manufacturers. We believe that 2020 is expected to be the first year of the company's OEM business, thus stepping into the high-speed growth period of the 2.0 era. In the future, under the two-wheel drive of AM+OEM, the market share of the company's automobile hub bearing unit is expected to increase rapidly.
Profit forecast and investment suggestion
It is estimated that the EPS of the company from 2020 to 2022 is 3.57,4.00,4.45yuan, and the corresponding PE is 19.1,17.1 and 15.3 times. It will be given 25 times PE in 2021, corresponding to the target price of 100 yuan, which is still 47% higher than the current stock price, covering the company for the first time and giving the company a "buy rating".
Risk tips: the global auto market is not as good as expected; the company's AM market customer expansion is not as expected; the company's entry into the OEM market is not as expected; Sino-US trade frictions escalate.
