Key points of investment:
Bethel is expected to grow into a wire-controlled chassis system supplier in the future, and is optimistic about medium- to long-term growth capacity. The current market is worried about Bethel's future profit growth. This report determines subsequent revenue growth by splitting the number of projects, determines changes in net profit through the profitability of subsidiaries, and determines changes in cost rates and costs through scale effects, respectively, and is optimistic about the sustainability of the company's revenue and performance growth in the future.
Looking at subsequent company revenue growth from the number of product projects
Since 2022, the number of new targeted projects has continued to increase. In 2021/2022/2023, 160/368/320 new targeted projects were added, and in 2021/2022/2023, 119, 166/241 new mass production projects were added, and there are still many ongoing projects. Considering that automotive safety parts require 6-8 quarters of R&D and testing and 2 quarters of climbing sales from fixed-point to mass production, the second half of 2023 will enter a new phase of accelerated fulfillment.
According to historical new mass production projects, Bethel's individual new mass production projects contributed about 20 to 30 million yuan in annualized revenue. As new mass production projects are put into operation, the company's revenue is expected to grow rapidly in the future.
Looking at the company's profitability from the perspective of subsidiary business and performance
The company's future revenue and performance growth is mainly contributed by overseas business and shift to emerging businesses. Overseas business was completed by Weihai Bethel and Mexican companies, which achieved revenue of 1,364 billion yuan in 2023; net profit of 233/-27 million yuan, respectively. The two subsidiaries are expected to increase revenue and performance in 2024, taking into account strong overseas demand, the accelerated progress of the company's project acquisition, and the clear division of labor between Weihai Bethel and Mexican companies. The shift business was mainly completed by Wanda, which achieved revenue of 1.03 billion yuan in 2023; achieved net profit of 46 million yuan. Increased profit margins are expected to contribute to the increase in performance.
Looking at the scale effect, the reduction in company expenses and operating costs
Sales of Bethel products accelerated in 2023. Among them, sales of disc brakes/lightweight/intelligent electronic control/steering systems were 284.8/1019.0/372.3/2.33,000 units, respectively, up 26.6%/31.32%/48.9% year-on-year respectively. The scale effect is remarkable, manufacturing costs have declined significantly, the growth of cost-side R&D personnel has slowed, and costs and cost rates may continue to decline driven by high revenue growth.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 100.1/130.2/16.59 billion yuan, respectively, with year-on-year growth rates of 33.9%/30.0%/27.5%; net profit to mother of 11.8/15.8/2.06 billion yuan, respectively, with year-on-year growth rates of 32.8%/33.8%/29.9%; EPS of 2.73/3.66/4.75 yuan/share, respectively, and a 3-year CAGR of 32.1%. Referring to comparable company estimates, the average PE in 2024 was 29.4 times. In view of the company's future online chassis synergy effects and the continued release of overseas production capacity, we gave the company 30 times PE in 2024, with a target price of 81.9 yuan, maintaining a “buy” rating.
Risk warning: The progress of intelligent cars falls short of expectations. Competition in the parts industry is intensifying. The convertible bond raising project has fallen short of expectations. Risks of operating overseas businesses.