Incidents:
The company released its semi-annual report for 2023. In the first half of 2023, it achieved operating income of 5.601 billion yuan, +1.72% year on year, realized net profit of 387 million yuan, +19.55% year on year, achieved net profit of 346 million yuan after deducting non-return net profit of 346 million yuan, +28.18% year on year.
Starters and generators developed rapidly, and profitability increased markedly. The company achieved revenue of 1,351 billion yuan in the first half of the year, +27.84% year-on-year. The rapid development of starter and generator business products led to an increase in the company's overall revenue. In the first half of the year, the company adjusted and optimized the product structure in a timely manner, further improved the efficiency of all aspects of R&D, production, service, marketing and logistics, vigorously expanded overseas markets on the basis of stabilizing the domestic market, and continued to grow profitability. In the first half of the year, the company's gross profit margin was 20.84%, +3.04 pct year on year, and net interest rate 7.22%, +1.11 pct year on year.
The powertrain has received numerous fixed points, and the rotating electric appliance continues to expand the number of customers
The company's third-generation “three-in-one” electric drive assembly product platform has completed technology research and development. The core technology has been applied in mass-produced products, and has obtained project targets from many car companies such as Geely, Chery, Dongfeng, Changan, and BAIC. The company's vehicle rotating electrical products are actively expanding customers at home and abroad. Among them, Petra, which is responsible for the commercial vehicle market, has further increased its revenue and share in the air conditioning system market for OEM customers in South America, generator products continue to expand in many European countries, Genori, which is responsible for the passenger car market, continues to expand its share in car companies such as Chery and Geely, and drive motors supporting Chery QQ ice cream have achieved mass production.
Plan the spin-off and listing of subsidiaries and further expand financing channels
The company announced on May 12, 2023, that it plans to spin-off and list its wholly-owned subsidiary Shanghai Electric Drive. Shanghai Electric Drive is the main implementing entity of the company's vehicle business group. The spin-off and listing is expected to promote the reasonable valuation of the company's various business segments in the capital market. At the same time, it will also help Shanghai Electric Drive broaden financing channels, improve industrial layout, increase product development and production capacity. At the same time, it will also help the company raise the level of governance, improve the equity incentive mechanism, and lay a good foundation for the company's long-term development.
Profit Forecasts, Valuations, and Ratings
Considering the slowdown in the air conditioning export market growth rate, we expect the company's revenue from 2023-2025 to 116.60/135.82/15.787 billion yuan (original value was 135.61/163.59/19.210 billion yuan), with a year-on-year growth rate of 6.68%/16.48%/16.24%, a 3-year CAGR of 13.04%, and a net profit of 556/694/829 billion yuan (original value of 630/7.78/937 billion yuan), respectively. 30.17%/24.75%/19.56%, EPS was 0.23/0.29/0.35 yuan/share, respectively, and corresponding PE was 22.4/18.0/15.0 times, respectively. Referring to comparable companies, we gave the company 28 times PE in 24 years, a target price of 6.44 yuan, and maintained a “buy” rating.
Risk warning: downstream demand falls short of expectations, customer development falls short of expectations, new product development falls short of expectations