Key points of investment
Incident details: After the market on August 22, the company disclosed the 2024 interim report. In the first half of 2024, the company achieved operating income of 1.533 billion yuan, a year-on-year decrease of 11.60%; net profit to mother was 0.219 billion yuan, a year-on-year decrease of 11.62%.
Due to fluctuations in sales volume of some customer terminal models, the company's performance in the first half of 2024 was temporarily under pressure. In the first half of 2024, the company achieved revenue of 1.533 billion yuan, a year-on-year decrease of 11.60%, and achieved net profit to mother of 0.219 billion yuan, a year-on-year decrease of 11.62%. The company's revenue and net profit declined from January to June 2024, mainly because sales of core customer terminal models such as Tesla and Ideal fell short of expectations. Looking at specific data, Tesla's global sales volume in the first half of 2024 totaled 0.8377 million vehicles, down 6.6% from the same period last year. According to statistics from overseas agency JATO Dynamics, its European market performance fell 13%, local US performance fell 8%, and the Chinese market's performance decline reached 10%. Meanwhile, Ideal Auto issued an announcement in March 2024 stating that due to sales orders falling short of expectations, the delivery volume for the first quarter was expected from 0.1 million to 0.103 Million cars were lowered to 0.076 million cars to 0.078 million cars, a reduction of about 0.02 million cars. The above customers are the company's core customers, and fluctuations in model sales have had a big impact on the company's performance; according to the company's previous prospectus, Tesla and Ideal ranked the company's top two customers in the first half of 2022, together accounting for more than 50% of the company's current revenue.
The year-on-year growth rate of 2024Q2's revenue and net profit declined in a single quarter. 2024Q2 achieved revenue of 0.752 billion yuan, a year-on-year decrease of 17.12%, and a further 11.59 percentage point decrease from the first-quarter revenue decline; achieved net profit of 0.104 billion yuan in a single quarter, a decrease of 26.30% year-on-year, and a decrease of 34.13 percentage points from the first quarter's net profit growth rate. 1) The company's revenue and net profit growth rate in the second quarter were both lower than in the first quarter. Sales of core customer models such as Tesla fluctuated more significantly in the second quarter. According to CNEV Post statistics, Tesla China sold a total of 205,747 vehicles in wholesale in the second quarter of 2024, down 16.77% year on year and 6.85% month on month. 2) The net profit change in a single quarter does not match revenue, which is expected to be greatly affected by gross margin; 2024Q2 gross margin was 21.76%, down 4.89 percentage points year-on-year from 2023Q2. Based on industry conditions and company announcements, gross margin fluctuations are mainly due to the decline in gross margin due to increased competition in the automobile market, and the average price discount of some domestic dealers climbed to a record high of more than 20% in the second quarter; on the other hand, as projects such as “Yancheng 9200T Die-casting Island” and “Yancheng Doli Phase II Plant” were transformed one after another, the company added 0.231 billion yuan in fixed assets at the end of 2024Q2 compared to the end of 2024Q1, which led to a corresponding increase in depreciation and amortization costs in the current period.
Looking ahead to the second half of 2024, the company's new and old customers are making concerted efforts, and the “basic plate” stamping parts business is expected to improve. 1) Tesla experienced a “cold winter” in the first half of the year, and sales data strengthened in July; according to statistics from the Passenger Federation, Tesla sold 0.0741 million domestic Model 3 and Model Y vehicles in July, up 15.3% year on year and 4.4% month on month, showing signs of a rebound after a lapse of 4 months. 2) In 2023, the company added a new customer, BYD, which is expected to be accompanied by the gradual expansion of partner models, or help improve the company's performance in the second half of the year; looking at the first half of 2024, BYD sold more than 1.6 million new energy vehicles, ranking first in the country. 3) In terms of other existing customers, the Zero Sports Car C16 was officially launched at the end of June this year. The Jinhua Daya production base, which mainly supports Zero Sports, has now completed plant construction and entered the mass production stage; NIO's second brand, ONVO Ledao, will also launch a new model “Ledao L60” in the second half of 2024. It is expected that the launch of the new model will bring a certain contribution to the company's revenue. According to the company's announcement in August '24, combined with customer estimates of terminal production and sales volume for the second half of the year, the company's order schedule for the third and fourth quarters has increased compared to the second quarter.
Based on the development trend of electrification and lightweighting in the automotive industry, the company's integrated die-casting business is progressing in an orderly manner. Considering that integrated die casting is more in line with the lightweight development needs of new energy vehicles, the company began to lay out the integrated die casting business in the second half of 2020. 1) In terms of capacity construction, the company mainly laid out four integrated die-casting production lines in Yancheng, Jiangsu and Lu'an, Anhui, and announced the addition of an integrated die-casting production line layout in Jintan, Changzhou in April 2024. As of June 30, 2024, the die-casting production lines in Yancheng and Lu'an have been converted from ongoing projects to fixed assets, and the Changzhou Jintan project has entered the plant construction stage. 2) At the customer level, according to the company's announcement, the wholly-owned subsidiary Kunshan Daya (located in Jiangsu) will provide customers with integrated die-cast floor parts for a leading domestic NEV manufacturer, with an estimated total sales amount of about 2.1-2.3 billion yuan during the life cycle; while the Anhui Lu'an production line plans to undertake integrated die-cast parts business for NIO Auto and other customers. According to the launch date of supporting related models, the company's integrated die-casting business is expected to gradually enter stable mass production in 2025 and 2026.
Investment advice: The company's performance in the first half of 2024 is temporarily under pressure, but looking ahead to the second half of 2024, sales of core customer models such as Tesla are expected to improve, and new models from brands such as Zero Sports and NIO will be launched one after another, and the development of the company's stamping parts business is expected to improve. In the long run, the company is one of the earliest domestic companies engaged in the production of automotive stamping parts. It is deeply tied to leading NEV companies such as Tesla, Ideal, and NIO. In recent years, it has also developed leading brands such as BYD and Zero Sports, or has benefited from the continuous increase in the penetration rate of new energy vehicles. At the same time, along with the trend of automobile lightweight development, large-scale applications of integrated die-casting are expected to open up, which is beneficial to the company's sustainable development. In response to the temporary pressure on the company's performance in the first half of the year, we slightly lowered our 2024 performance forecast. The total revenue for 2024-2026 is 4.293 billion yuan, 5.233 billion yuan, and 6.218 billion yuan respectively, with year-on-year growth rates of 9.7%, 21.9%, and 18.8% respectively; corresponding net profit to mother is 0.532 billion yuan, 0.66 billion yuan, and 0.797 billion yuan, respectively, with year-on-year growth rates of 7.2%, 24.0% and 20.8%; the corresponding EPS was 2.23 yuan, 2.76 yuan, and 3.34 yuan, respectively, and the corresponding PE was 8.9x, 7.1x, and 5.9x, respectively, maintaining the “A” rating.
Risk warning: NEV industry prosperity risk, risk caused by uncertainty in NEV development, risk of new business expansion falling short of expectations, macroeconomic and industrial policy risk, risk of high customer concentration, risk of raw material price, risk of technological innovation, risk of market competition, etc.
