The main products of the company, which is one of the leaders in the R&D and production of NEV power systems, are the core products of power systems such as NEV drive assemblies, power supplies, and motors and motor controllers. The company uses innovative “integrated core” technology to make the product have significant advantages such as high efficiency, light weight, and low cost, and has reached cooperation with many well-known car companies and international parts groups such as Geely Automobile, SAIC Motor, Great Wall, Chery, Changan, Dongfeng, JAC, Xiaopeng, Bosch, China, etc. At the same time, the company's products are widely used in fields such as electric construction machinery and commercial vehicle electrification. In 2023, the company's sales revenue was 1.963 billion yuan, and the revenue CAGR in the past 5 years developed rapidly; net profit after deducting non-return to mother was 0.082 billion yuan in 2023, and profit grew by leaps and bounds in the past 5 years. In the future, the company will strategically base itself on the passenger vehicle sector and develop special vehicles and low-altitude eVTOL aircraft businesses through strong joint vTOL partnerships.

New energy vehicles and the low-altitude economy are booming, and demand for integrated electric drive systems is rising

According to data released by the China Association of Automobile Manufacturers, China's NEV production and sales have been ranked first in the world for many years, maintaining a rapid development trend. In 2023, China's NEV production and sales volume reached 9.587 million units and 9.495 million units respectively. With the combination of stock policies and incremental policies, new energy vehicles will continue to grow rapidly.

Similar to new energy vehicles, power batteries, drive motors, and electronic control systems are also core components in electric aircraft represented by eVTOL aircraft. The similarity of electricity in the aviation, drone, and NEV industries has reached 80%-90%.

However, the requirements for three-electric systems for eVTOL aircraft are higher than those for new energy vehicles. To facilitate installation, commissioning and maintenance, electronic control systems generally use integrated and modular design ideas to integrate different functions and components into independent modules.

The company leads the “integrated core” drive assembly market and deeply participates in the Ehang intelligent industry chain to open up long-term space

The company's “integrated core” technology platform builds high-performance, high-reliability, low-cost, and modular standard platform products in terms of hardware; in terms of software, it quickly provides personalized customization requirements through flexible software platform-based configuration to provide customers with efficient and mature power system solutions for new energy models from A0 class to C class. “Integrated core” drive assembly products are light in weight, small in size, and have high power density, which is convenient for platform-based, automated, and large-scale production, opening up the generational gap with drive assembly products with the same power level as the market, and has obvious competitive advantages. On November 11, 2024, the company announced that it has signed a strategic cooperation with Ehang and received a technical development notice for Ehang intelligent products. The company will provide power motors and controller products for the customer's unmanned eVTOL (electric vertical take-off and landing aircraft) product development. At the same time, the company signed a share subscription agreement and an announcement to participate in the targeted distribution of Eaviation. As the only domestic company with airworthiness certificates, Ehang is expected to seize opportunities in the low-altitude economy along with the industrial chain.

Smart factory production capacity is about to be released, and the product upgrade to higher added value The company has a Zhuhai base of 0.065 millionm? The integrated powertrain production plant, in order to lead the technological iteration of the NEV industry and meet the intelligent and automated production requirements of customers for rapid upgrades, has carried out technological transformation and investment in automation equipment at the Zhuhai production base. It has basically built a higher-degree automated electronic control, power supply system, flat wire motor, and powertrain assembly production line, with a production capacity of one million sets of products per year.

In order to be closer to customer production bases and achieve efficient platform-based product production management for the company's different categories of products, the company has set up a production base for electric vehicle drive systems and power systems in Shandong to further improve the company's production capacity layout and category management, and enhance the company's industry competitiveness.

In order to meet the production capacity reserve requirements of major customer strategies and stabilize its market position and competitive advantage, the company initiated convertible bond financing to build a high-standard powertrain automation workshop project. The project will further improve the level of production automation, meet the power system requirements of B-class and C-class models, and optimize the company's customer structure.

Investment advice

The company focuses on the superior product “integrated core” all-in-one system, using product experience and technology for new energy passenger vehicles to actively expand customers in the commercial vehicle, medium and heavy truck fields; in the field of non-road vehicles and construction machinery, the company established a joint venture with Bosch Rexroth to give full play to the technical advantages and market advantages of both parties; in order to stabilize its market position and competitive advantage, the company will launch convertible bond financing to build a high-standard powertrain automation workshop project. The project will further improve the level of production automation, meet the power system needs of B-class and C-class models, and optimize the company's customer structure. In addition, the company has been developing low-altitude aircraft products, and cooperation with Ehang Intelligence has already begun. With the commissioning of new production capacity and increasing performance in the field of intelligent construction machinery, we expect the company to achieve operating income in 2024-2026

2.398/3.261/4.143 billion yuan, year-on-year growth rates were

22.1%/36.0%/27.0%, net profit attributable to mother was 0.084/0.118/0.166 billion yuan, respectively, with year-on-year growth rates of 1.4%/41.4%/40.2%, corresponding EPS of 0.33/0.46/0.65 yuan respectively, and PE corresponding to the closing price of 24.79 yuan on December 6 was 75.91/53.70/38.31X, respectively. Considering the large application space, broad prospects and high growth rate of the electric drive industry, the first coverage gave it an “gain” rating.

Risk warning

Risks of industrial policy adjustments, customer credit risk, increased risk of industry competition, etc.