The current situation of the company
Tianneng Power proposed to spin off Tianneng battery (lead-acid battery business and trading business) to Kechuang board listing was formally examined and approved 1. At the same time, the company previously issued a profit forecast for the medium-sized report, which is expected to increase the net profit of 1H20 by 30% or more.
Comment
After the break-up, it may usher in a further revaluation. The average P/ETTM of the company in 2018 and 2019 is only 7.5x.95x, while Camel shares, which are also engaged in lead-acid batteries and recycled lead, correspond to 18.4 picks 15.8x in A shares, while the P/ETTM corresponding to the company's closing price as of July 6 is 10.1x, which is still quite different from that of domestic comparable companies. In addition, the spin-off subsidiary Tianneng Battery plans to raise 3.59 billion yuan, corresponding to the proportion of the issued share capital of up to 12% disclosed in the prospectus of science and technology to the total share capital after the issue, the listed market value of the corresponding Kechuangzi company is 29.9 billion yuan. Tianneng Power, which currently has a market capitalization of HK $18.9 billion, will still hold more than 80 per cent of Tianneng Battery, a spin-off subsidiary, after the split is completed. We believe that the overall value of Tianneng Power can be revalued.
The epidemic affects the mode of travel, and the industry boom drives the high growth of 1H20 performance. We believe that under the influence of the epidemic, some personal travel scenes have been switched from public transportation to two-wheeled electric vehicles, while the demand for two-wheeled electric vehicles has been further accelerated under the rise of takeout. According to the statistics bureau, the production of two-wheeled electric vehicles in China maintained a year-on-year growth of 41% in May 2020. Considering the increase in the use frequency of two-wheeled electric vehicles as a whole, we believe that there is also a good demand-driven role in the maintenance and replacement market. In addition, the current lead price is still low. Tianneng Power, as the industry leader with a market share of more than 40%, can periodically maintain price stability in the process of lead price decline in order to improve the gross profit level. We believe that demand growth and profitability are better than the same period last year, driving the high performance of 1H20.
The medium-and long-term demand in the lead-acid industry is stable, and the short-term impact of lithium replacement is limited. We believe that the overall market of lead-acid bicycles has formed a complete closed-loop layout of preloading, maintenance, replacement and recycling, and the maintenance and replacement channels of batteries are firmly controlled by the faucet. In addition, the target customer base is highly sensitive to price, and the lead-acid battery has formed the brand effect of parts and components, with customer stickiness. We believe that lithium battery will take the lead in accelerating the penetration of shared scooter applications and high-end electric two-wheelers in first-and second-tier cities, while the penetration of mass use and takeout applications is limited in the short term.
Valuation proposal
Considering the improvement of demand and profitability in the industry boom, we raised the company's profit forecast of 2020Unix 2021E by 13% to 2.43 billion yuan. In view of the company's improved profits, further recognition of the industry growth space, and a spin-off revaluation, we raised the company's target price by 150% to HK $20. The current share price corresponds to 2020x2021e 8.0max 6.9x Pmax E and 9.5max 8.2x Pmax E respectively, with 18.9% upside space to maintain an industry rating that outperforms.
Risk.
Lead prices are rising rapidly, and the output of electric bicycles is not as expected.