Sales of Sanhua refrigeration components grew rapidly in April: According to industry online data, sales of Sanhua stop valves, four-way valves, and electronic expansion valves in April YoY +7.9%/+24.0%/+28.5%. Since the beginning of the year, air conditioning manufacturers have actively scheduled domestic and foreign sales, driving a continuous increase in demand for upstream refrigeration components. We believe that, benefiting from continued demand for overseas inventory replacement, and the “trade-in” policies for home appliances in various regions to stimulate the release of demand for air conditioning upgrades, China's air conditioning companies' production schedules continue to grow at a high rate, driving sales of refrigeration components to continue to grow at a high rate. According to industry online data, domestic air conditioning emissions increased 10.0%/4.4% compared to last year's performance in May and June; export emissions increased by 34.5%/30.5% compared to last year's performance. Furthermore, as energy saving and environmental protection requirements increase, the share of high-efficiency inverter air conditioners is expected to drive continuous growth in demand for electronic expansion valves. As a global refrigeration control components industry, Sanhua will fully benefit from increased industry demand.
The NEV market performance was stable in April: According to data from the China Association of Automobile Manufacturers, China completed production and sales of new energy vehicles of 870,000 units and 85,000 units respectively in April, with YoY +35.9%/+33.5%. With the implementation of the “trade-in” automobile policy and the introduction of new models, production and sales of new energy vehicles continued to grow rapidly in April. Sanhua focuses on the research and development of air conditioning and thermal management products for new energy vehicles. It has significant scale advantages and leading R&D capabilities. We believe that sales of Sanhua auto parts increased rapidly year on year in April.
Investment advice: Sanhua Intelligent Control is a global leader in refrigeration control components and thermal management system control components for new energy vehicles. The company continues to expand high-potential fields such as robots and energy storage, and revenue performance is expected to increase rapidly. We expect the company's EPS to be 0.93/1.13/1.30 yuan from 2024 to 2026, maintain the buy-A investment rating, and give the company a PE valuation of 30x in 2024, which is equivalent to a six-month target price of 27.82 yuan.
Risk warning: the risk of a sharp appreciation of the RMB, a sharp increase in the price of raw materials, and a deterioration in the foreign trade environment.