Investment advice
At the State Council policy routine briefing on April 11, it was stated for the first time that the central financial administration will provide financial support for large-scale equipment upgrades and consumer goods trade-in, while local finance will also provide certain financial support based on their respective financial resources1. We believe that large-scale equipment updates require energy saving and carbon reduction and energy efficiency, which is expected to drive the replacement of existing motors. The motor industry may restart the boom cycle, and the company, as an industry leader, is expected to take the lead in benefiting or facing revaluation. Furthermore, 2024 is the first year of low-altitude flight. We believe that the company is currently one of the few domestic companies that can supply aerospace-grade motors, which are scarce and are expected to directly benefit.
rationales
Industrial motors: It is expected to continue to benefit from overseas reindustrialization and domestic large-scale equipment renewal policies.
We believe that downstream demand for industrial motors continues to improve. By market, large-scale equipment renewal policies in the domestic market are expected to drive the acceleration of downstream energy saving and emission reduction transformation. The momentum of re-industrialization in North America is strong, and the trend of re-industrialization in Europe is clear. The company has advantages in global manufacturing and is leading the industry in energy-saving technology for asynchronous motors. In overseas markets, the company uses the original brand and a business model to achieve local production and local sales, and has supply chain and brand advantages. We believe that the company can benefit from overseas reindustrialization trends to a large extent. At the same time, we are optimistic that the company, as a domestic motor leader, will directly benefit from large-scale domestic equipment renewal policies.
Micromotor: White power schedule showed strong performance in the first year, or benefited from a new round of trade-in. According to the Home Appliance Group's opinion, inventory in the 2H23 home appliance industry has bottomed out, and demand for white electricity was strong at the beginning of '24. At the same time, the trade-in policy is expected to boost sales of home appliances in '24. We expect the company's micro motor business to benefit, and we are optimistic that micro electric motors will achieve 10% + revenue growth in 24 years and return to positive growth.
EV motors: continue to benefit from scaling and structural optimization, and are expected to reach an inflection point in profit and loss in 24 years. On the passenger car side, we believe that the company is expected to gradually usher in a gradual release. The scale effect is prominent, and it is expected that the profitability of the passenger car sector will remain stable. On the commercial vehicle side, downstream demand has picked up in 24 years, and commercial vehicle motors have relatively better profitability. We believe that, benefiting from the recovery in commercial vehicle demand and better profitability, the company's new energy motor business profits are expected to improve and may reverse losses throughout 2024.
New business: 1) Low-altitude flight: eVTOL motors have high technical barriers and good profitability. The company has been deploying electric aviation since 19. Currently, it is one of the few domestic enterprises with the ability to supply eVTOL motors in batches, and the first-mover advantage is remarkable. We are optimistic that the company's electric aviation products will develop and expand with the industry to support the company's growth and profitability improvement in the medium to long term. 2) Robotics: The company acquired European SIR construction channels and actively strengthened servo motor reserves. We expect the company to expand into the field of humanoid robots in the future.
Profit forecasting and valuation
We remain unchanged from 2024/2025, with a target price of 18.0 yuan. The current stock price and target price correspond to 2024/2025 16.4X/13.7X and 20.2X/16.8X P/E, with 23.5% room to rise, maintaining an industry performance rating.
risks
Sales of new energy vehicles fell short of expectations, macroeconomic recovery fell short of expectations, and bulk prices fluctuated sharply.