Main points of investment

In the use of vehicle testing leader, operational services + new energy vehicle inspection to help the company to gain a foothold in the automobile market, is the domestic in-use vehicle testing leader, cut into the downstream testing operation service market by the equipment end to create an integrated service platform. The company's two main businesses are vehicle testing systems and testing operation services, accounting for 57% and 40% of revenue and 54.3% and 42.7% of gross profit respectively in 2022. Subject to the adjustment of China's motor vehicle annual inspection policy, the company's performance is under short-term pressure.

The draft of the regulations for testing the Operation Safety performance of New Energy vehicles has been released, which is one step closer to the formal promulgation of the standard. The company has started the research and development of new energy vehicle testing equipment and technology, which may become a new performance growth point in the future. The company distributes the service market of vehicle inspection through mergers and acquisitions, which is expected to become the driving force for the company's long-term growth.

Motor vehicle testing: the number of cars has increased steadily, and the demand of the vehicle inspection industry is related to the number of motor vehicles and the age of the vehicle, with a market scale of more than 50 billion yuan. In 2021, 2020 and 2022, the new vehicle testing policy relaxed the superimposed impact of compulsory vehicle testing requirements, and the frequency and number of motor vehicle testing decreased to a certain extent. The sales of new cars in China are accelerating, and the number of new cars continues to grow. With the increase of the age of cars in use, the inspection and measurement will gradually return to growth. The number of motor vehicles in the country in the first half of 2023 was 426 million, an increase of 4.9 percent over the same period last year, and car sales increased by 41.7 percent over the same period last year. Compared with developed countries, the overall ratio level of motor vehicle testing stations in China is low, the differences in vehicle inspection frequency and cycle are large, and the space for long-term development is sufficient.

The company is expected to benefit from the renewal of new energy vehicle inspection equipment, and is committed to building a domestic vehicle inspection operation chain brand for a long time. 1) vehicle inspection equipment: the leading position is stable, or it will give priority to benefit after the introduction of new energy vehicle testing standards in the future. On June 30, 2023, the draft of "Inspection regulations for Operation Safety performance of New Energy vehicles" was released, which intends to carry out supplementary tests on the operation safety performance of new energy vehicles, such as power storage battery safety, drive motor safety, electric control system safety, electrical safety and so on. The required testing equipment involves four major testing items: power battery safety, drive motor safety, electronic control system safety and electrical safety. It is expected that the content and difficulty of inspection and testing of new energy vehicles will be improved in the future, and the raising of the industry threshold is expected to optimize the competition pattern. The company already has equipment and technology R & D reserves. After the formal introduction of the standard, it may give priority to benefit and become a new performance growth point of the company.

2) operational services: through a series of endogenous and extrinsic operations, such as mergers and acquisitions, new testing stations, etc., to explore the chain operation to realize the branding of operational services, it is expected to become the source of the company's long-term performance growth. By the end of 2022, the number of testing stations directly operated by the company was 41. Since 2023, the company has acquired 11 new testing stations, continued to focus on expanding the motor vehicle testing operation service market, and accelerated the process of mergers and acquisitions of testing stations.

Profit forecast and valuation

It is estimated that the net profit of homing from 2023 to 2025 is 0.63,1.47 and 206 million yuan respectively, and the compound growth rate from 2024 to 2025 is 134.33% and 39.79% respectively compared with the same period last year. The compound growth rate in 2023-2025 is 80.99%, corresponding to 62,26,19 times of PE, and the current PEG is 0.77 times. It is covered for the first time and is rated as "overweight".

Risk tips: 1) the vehicle testing policy is further relaxed; 2) the acquisition and integration of motor vehicle testing stations is not as expected; 3) the development of new business is not as expected.