Key points of investment:
After more than 20 years of development, the company established a “home appliance+zero” dual-wheel drive business layout. Dechang Co., Ltd. was founded in 1998 to produce vacuum cleaner circuit boards and hardware; Ningbo Dechang Motor Manufacturing Co., Ltd. was established in 2002, dedicated to the R&D and production of motors and household vacuum cleaners; in 2012, the company established strategic cooperation with well-known international brands to produce and develop complete vacuum cleaners; established a subsidiary, Ningbo Dechang Technology Co., Ltd. in 2017 to expand its business into the field of automotive EPS brushless motors; in 2018, the company cooperated with well-known international brands. Development and production of beauty and hairdressing products; in 2019, the company established a subsidiary, Ningbo Dechang Electric to enter the family health care industry and achieve diversified product development; in 2021, the company was successfully listed on the Shanghai Stock Exchange. Currently, the company is implementing the development plan of “vacuum cleaner-based business, diversified small household appliances as growth business, and EPS motors as strategic business”, and has gradually formed a “home appliance+zero” two-wheel drive business pattern.
Adhering to the major customer cooperation line, the company has reached long-term cooperation with many internationally renowned home appliance companies. Currently, the company's home appliance foundry business customers mainly include Chuangke & Technology (TTI), Helen Troy (HOT), and Shark Ninja (SharkNinja). Judging from customer qualifications, Chuangke Industrial's floor care business has an annual revenue scale of about 1 billion US dollars, and HOT's revenue is stable at around 2 billion US dollars. High-quality customer resources have brought stable orders to the company.
Demand for EPS motors is generally stable, but there is still considerable room for domestic replacement. According to data from Intelligent Research Consulting, domestic demand for EPS motors in 2022 was about 18.948 million units, with production of 6.677 million units in China, and 12.61 million units in joint ventures and imports. EPS motors are the core components of automobiles, and there is still plenty of room for domestic replacement.
Continued acquisition of customer targets, and the company's auto parts business developed rapidly
According to the company's announcement, in 2023, the company obtained 4 new designated EPS motor and brake motor projects, with a total sales amount of over 1.4 billion yuan; by the end of 2023, the company had achieved a total of 30 targeted automotive motor projects, 18 of which had achieved mass production, with a fixed amount of over 2.3 billion yuan in 2024-2026. 2023 is the company's second year of mass production of automotive motors, with annual sales exceeding 1.2 million units, and some progress has also been made in the field of online motor control. In terms of production capacity, as of the end of 2023, the company's annual design capacity for EPS motors and brake motors exceeded 3 million units.
Profit forecasting and investment advice
We expect the company to achieve net profit of 4.07/520/644 million yuan in 24-26, respectively, +26%/28%/24% year-on-year, respectively. We use a comparable company valuation method. According to iFind's consistent profit forecast, the average PE value of comparable companies in 2024-2025 was 20.2/17.3 times, respectively, higher than the company's 18.7/14.7 times. Considering that the company's home appliance business continues to expand new customers and categories, and at the same time, the auto zero business is rapidly expanding and covered for the first time, giving it a “buy” rating.
Risk warning
Industry demand fell short of expectations, raw material prices rose sharply, exchange rates fluctuated greatly, etc.