[Core Conclusion] We expect the company's 2023-25 revenue to be 46.76/59.15/7.419 billion yuan, net profit to mother of -2.19/1.68/397 million yuan, and the PE corresponding to the company's current price is -/44/19 times. First coverage, giving a “buy” rating.
[Report Highlights] Try to answer the market's biggest concerns: How is the company's growth and profitability? We believe that the company currently has plenty of orders. Along with the increase in product allocation rates such as central computing, body/chassis domain control, AR-HUD, and 4D millimeter waves, the company is expected to achieve a double hit of beta (product allocation rate) +α (market share). We expect the company to recover profit margins while growing rapidly in revenue.
Main logic #1 In terms of the electronics business, changes in the electronic and electrical architecture give the company more business opportunities:
In the era of distributed electronic and electrical architectures, the company has mastered the underlying technology of the five major areas of automotive electronics, and achieved mass production of various controllers for car bodies, chassis, intelligent connectivity, new energy and power systems; in the central domain control era, the company launched industry-leading central computing+regional control products based on years of technology accumulation, which is expected to become a star product, and is expected to be mass-produced in models such as Aian, Nana, and Xiaomi. In the short to medium term, along with the evolution of automotive E/E architectures to central integration, the company's product ASP is expected to increase dramatically (100-300 yuan to 1,000 yuan). At the same time, benefiting from the smart car era, car companies have a faster R&D cycle, and industry factors such as lack of cores, the localization of automotive electronics is accelerating, and the company's market share is expected to increase in the future.
The main logic #2 R&D consulting business is also highly deterministic: in the smart car era, the model iteration cycle has accelerated, and there have been major changes in the electronic and electrical architecture. The increase in R&D investment by automakers has led to an increase in demand for third-party technical consulting vendors. The company's R&D consulting business covers 11 types of businesses, including vehicle electronic and electrical architecture consulting. The company can help car manufacturers reduce costs and achieve domestic software replacement at the design level.
Main logic #3 The company has outstanding R&D capabilities and a full-stack product layout, and is expected to become a Bosch-like automotive electronics giant. The company's patents have been successfully granted close to 60% (3M24), and its master's degree employees account for nearly 90% (2022). It has more than 2,000 intellectual property rights (1H23), and has achieved a comprehensive layout of smart driving (perception - decision - execution), cockpit, body, chassis, and connectivity automotive electronics businesses, and is expected to grow into a platform-based automotive electronics giant similar to Bosch.
Risk warning: risk of developing new business; risk of technology and product iteration; risk of declining gross margin.