Twenty years of focus on the field of charging modules, leading the technology industry. Tonghe Technology is mainly engaged in R&D, production, sales and service of products in the power electronics industry. In the field of new energy vehicles, the main products include products such as charging power supplies for charging and switching stations, thermal management power supplies; in the field of smart grids, the company's main products include power operation power supplies and distribution network automation power supplies; in the aerospace field, the subsidiary Hawway Power's current products are mainly small to medium power power modules, power components and customized power supplies. The three major business areas have clear strategic positioning, balanced development and mutual support.
Benefiting from the booming development of the NEV industry, there is still plenty of room for charging pile construction. Currently, the overall ownership rate of new energy vehicles is low. The total domestic passenger car ownership rate exceeds 300 million, and the EV penetration rate is only 6%. After long-term EVs further replace fuel vehicles, the demand for charging infrastructure has huge potential to increase. According to the sales volume of EV models about 25% CAGR in the next three years, considering that downstream operators still have the momentum to rush to install them, it is expected that the charging pile construction rate will still be higher than the EV growth rate in the next three to five years, reaching 30% or higher, and the industry will maintain a high level of prosperity.
A number of certifications have passed, and overseas markets are expected to gradually expand. The overall development of new energy infrastructure in Europe and the US lags behind the domestic market, and there is plenty of room for public DC piles to penetrate. Overseas markets have high gross margins, but customers have high requirements for reliability and safety. Modules need to pass various certifications to go overseas, and the certification process takes a long time. The company actively lays out overseas markets and has developed some customers in Russia, India, Europe and other regions. It has now completed CE and UL standard certification, and is expected to gradually expand overseas markets in 24 years.
The technology is constantly being upgraded, and the cost is industry-leading. Tonghe has been deeply involved in the power supply industry for more than 20 years, pioneered the launch of a 20kW high-voltage tolerant power module that meets the “six unification” standards of the State Grid, and has accumulated a lot. In the past two years, the company's charging module business has achieved a double increase in volume and profit margin, and compared to Youshang, we expect that as the charging pile industry develops in the direction of high voltage fast charging and high power density, the company's high-power module volume will also drive further improvement in product strength, and profitability is expected to continue to increase.
Smart grids and aerospace businesses contribute steadily to profits. Smart grids and aerospace are the company's high-margin businesses. Under the dual carbon target, domestic electricity investment is in a boom cycle, and power grid infrastructure construction is expected to drive a continuous increase in demand for power supply systems for electric power operations. The military power supply industry has high technical barriers and stable customers. Benefiting from the annual increase in defense spending and domestic replacement opportunities for military power supplies, the company's military power supply business is expected to increase profits.
Investment advice: The company has been deeply involved in the power supply industry for more than 20 years, with deep technical reserves, continuous improvement in product competitiveness, and good future development momentum. We expect the company's total revenue for 23-25 to be 921/12.63/1,637 million yuan, net profit to mother of 1.06/1.64 billion yuan, and corresponding EPS of 0.6/0.9/1.3 yuan/share. Referring to the valuation of comparable companies, and considering the valuation premium brought about by the company's leading position and the high-end nature of the product, we gave the company a valuation of 25xPE for its 24-year performance. The corresponding target price was 23.54 yuan. For the first time, we covered it, and gave it a “strong push” rating.
Risk warning: downstream demand falls short of expectations; NEV growth falls short of expectations; market competition intensifies; product prices fall; product substitution risks.