Key investment points

Incident: Sanhua Intelligent Control issued an announcement to terminate the plan to issue Global Depositary Receipts (GDR) overseas. On October 30, 2024, the company reviewed and passed the “Proposal on Termination of Overseas Issuance of Global Depositary Receipts”, terminating the plan to issue GDRs and list them on the Swiss Stock Exchange. The reason for the termination was due to changes in the company's internal and external environment. On November 8, the company issued an announcement stating that it had received a decision from the Shenzhen Stock Exchange to terminate the review of the company's issuance of GDR.

The company that terminated the issuance of GDR and changed to an H share listing to enhance financing capacity and international brand image is carrying out preliminary verification work on overseas issuance of securities (H shares) and listing matters. On the premise that it meets the relevant requirements of overseas regulators, the proposed issuance scale is expected to not exceed 10% of the company's total share capital after the issuance is completed. Compared to the Swiss market, which stopped issuing GDR, the Hong Kong market has investors more familiar with mainland companies and gathers global capital, which helps to obtain a lower issuance discount rate and attract capital attention, so it is a more favorable financing environment for companies. At the same time, the company also uses the Hong Kong market as an internationalization window to enhance the company's popularity in global capital markets, further promote its global strategy, and enhance its international brand image and overall competitiveness.

The original planned GDR fund-raising project was mainly automotive thermal management. The production and operation global layout company originally planned GDR to raise capital of no more than RMB 5 billion. The fund-raising projects include: 1) the production of automotive thermal management components in China, Mexico, and Thailand, of which the Mexican project plans to produce 8 million sets of intelligent thermal management components per year; 2) the establishment of an automotive parts production line in Poland; 3) the development of robot electromechanical actuators; and 4) the establishment of a technology center in Europe. Although the publication of GDR has been terminated, it can be seen that the company's global business layout and strategy to improve the company's level of intelligent manufacturing, digitalization, and informatization can be seen.

Humanoid robots and energy storage are gradually advancing, opening up room for future performance growth (1) Humanoid robots: In the field of bionic robots, the company focuses on mechatronic actuators and fully cooperates with customers in product development, trial production, and iteration. In 2012, the company announced that it plans to invest in the construction of a robotic mechatronic actuator and domain controller R&D and production base project in Qiantang District, with a total planned investment of not less than 3.8 billion yuan. (2) Energy storage: The company promotes the development of energy storage thermal management units, forms a more complete line of unit products, and incorporates them as leading customer support, laying the foundation for the subsequent development of products with technical advantages. The company is gradually advancing in the fields of humanoid robots and energy storage, opening up room for future performance growth.

Profit forecasting and valuation

We expect the company's 2024-2026 revenue to be 28.26, 32.77, and 38.23 billion yuan, respectively, with year-on-year growth rates of 15.09%, 15.94%, 16.67%, and CAGR of 15.9%; net profit to mother of 3.5, 4.19, and 4.89 billion yuan, respectively, with year-on-year growth rates of 19.73%, 19.65%, 16.81%, and a CAGR of 18.7%, corresponding PE of 25, 21, and 18 times respectively, maintaining the “buy” rating.

Risk warning: raw material price fluctuations, rising labor costs, trade and exchange rate risks