Key points of investment
It has won the largest US lithium battery equipment order from a Chinese company so far, and the strong one is Hengqiang. ABF is mainly engaged in the manufacture of lithium iron phosphate batteries. The goal is to build the first localized superbattery factory network in the US. Its first phase in Tucson, Arizona is expected to be completed and put into operation in 2025. Based on this strategic cooperation, Pilot Intelligence will become the only equipment supplier for ABF's first production line of the Gigafactory network project, providing ABF with a complete set of customized intelligent fully automated line solutions.
Through the integration of key steps in the manufacturing process, Pilot Intelligence can design and verify customized battery product processes for ABF, achieve full product life cycle traceability, help ABF achieve the important goal of building a 20 GWh lithium battery gigafactory, and lay a solid foundation for building the first LFP gigafactory network in the US.
Overseas battery manufacturers are expanding production at an accelerated pace, and the share of overseas orders for Pioneer Smart has increased. Compared to the problem of overcapacity caused by the drastic expansion of domestic power battery manufacturers, overseas production expansion is more rational. We are optimistic that the IRA Act will stimulate the localization of the US electric vehicle industry chain and accelerate the construction of Japanese and South Korean battery manufacturers such as LG and SK in the US; second, automakers such as Volkswagen and Ford will gradually expand production in the upstream battery chain, or build their own battery factories or establish joint ventures. Third, the number of European battery players such as ACC and Northvolt is also increasing. Compared to 15% of overseas orders in 2022 and 30% of overseas orders in 2023, we expect the share of overseas orders to gradually increase to 30-35% in 2024, and Pioneer Smart hopes that the share of overseas orders will reach more than 50% in the future. In 2023, European orders accounted for 80% of the total overseas orders. Subsequent orders from Europe, North America, and Southeast Asia will increase one after another. Leading overseas customers include Volkswagen of Germany, ACC of France, and Northvolt of Sweden.
Localization of the supply chain is a future trend, making it easy to improve the quality of overseas services. Prior to 2023, the pilot overseas business did not account for a high proportion of orders, so the pilot model was domestic production and processing, and then the production line was shipped overseas, but as local orders in Europe increased, the pilot began to build a local European supply chain, then extended to North America to localize the supply chain, which is conducive to reducing equipment delivery time, improving customer satisfaction, and reducing costs.
Profit forecast and investment rating: Considering the pace of equipment inspection, we maintain the company's net profit of 3.5/50/60 billion yuan in 2023-2025, corresponding to the current PE price of 11/8/7 times, and maintain a “buy” rating.
Risk warning: The sales volume of new energy vehicles fell short of expectations, and the expansion of production by downstream power battery factories fell short of expectations.