Incident: On April 29, Bethel released its 2024 quarterly report. 24Q1 revenue was 1.86 billion yuan, +24.05% year over year; net profit to mother was 210 million yuan, +21.85% year over year; net profit after deducting non-return to mother was 191 million yuan, +18.55% year over year.
2024Q1's performance was in line with expectations, and the intelligent electronic control and lightweight business helped the company grow rapidly.
By business segment: 1) Intelligent electronic control: sales volume of 923,000 sets in 24Q1, +28% year over year; 2) disc brakes: sales volume of 685,000 sets in 24Q1, +13% year over year; 3) sales of lightweight brake parts were 2,755 million sets, +52% year over year. Mainly the company's Mexican plant began production in 23Q3. 3) Mechanical steering: Sales volume was 739,000 units, +54% year-on-year. After Wanda Steering was acquired by the company, the operating efficiency of Wanda Steering was greatly improved. The 24Q1 company's gross profit margin was 20.7%, -0.75pct year over year, and -2.3pct month-on-month. We expect the decline in gross margin to be mainly affected by the annual decline in OEMs. At the same time, the company's expense ratio level remained stable. The 24Q1 sales expense ratio was 1.0%, the same as the previous year; management and R&D expenses rates were 2.52% and 5.96%, respectively, -0.07pct and -0.24pct.
New products such as WCBS2.0 and EMB are progressing smoothly, raising convertible bonds to expand production capacity and strengthen the leading position in domestic production.
1) The company's next-generation line control system, WCBS 2.0, can meet the safety redundancy requirements for L3 level autonomous driving. Among them, WCBS 2.0 has dual hydraulic power units and expandable EBD and ESC functions; WCBS 2.0 EHC products achieve electronic control redundancy through front-wheel EHC and rear-wheel EPB. At present, the company's next-generation line control products have been designated by many OEMs and are expected to be mass-produced in the first half of 2024.
2) The company continues to promote line control capacity layout. By the end of '23, the company's line control engine currently had 6 production lines, with a total production capacity of about 1.8 million units. According to the convertible bond plan issued by the company on January 5, after the construction of this fund-raising project is completed, it is possible to increase the movable production capacity of 1 million more sets of lines. 3) The first round of functional samples of the company's EMB has been successfully developed, and winter testing and verification has been carried out. The company's convertible bond raising project laid out 600,000 sets of EMB production capacity ahead of schedule.
The company's global customer expansion is accelerating, and the production capacity of the Mexican plant continues to expand.
1) Customer: In the first quarter of '24, the company obtained the target for a lightweight project from a new energy vehicle company in North America. The total sales revenue is estimated to be about US$122 million within 5 years of the project life cycle; at the same time, it also obtained the fixed target for the EPB project of a German joint venture car company. The total sales revenue is estimated to be about 600 million yuan within 8 years of the project life cycle. 2) Production capacity: Currently, the first phase in Mexico has 4 million units to save production capacity, corresponding to an annual output value of about 500 million yuan. It was officially put into operation in September '23. Mexico's second phase plans to save 5.5 million sets of cast aluminum steering capacity, 1.7 million sets of control arms and subframes, production capacity of 1 million EPB sets, and production capacity of 1 million front brake calipers.
Investment advice:
Maintaining the buy-A investment rating, we expect the company's net profit to be 11.7 billion yuan, 14.3 billion yuan, and 1.74 billion yuan respectively in 2024-2026, corresponding to the current market value, PE 21.5, 17.7, and 14.8 times, respectively. The 2024 valuation is 30 times, and the target price for 6 months is 81.3 yuan.
Risk warning: Competition in the industry is intensifying, and production capacity investment progress falls short of expectations.