German Union Group: A leading automotive fine chemicals company. The company's main business is a dual development model of “R&D, production and sales of automotive fine chemicals+automotive aftermarket service”. Among them, the former mainly supplies products to automobile manufacturers, while the latter targets the automotive aftermarket market, thus achieving full service coverage of the entire automobile use process from delivery to after-sales service. The domestic automobile market has entered the stock era, and the competitive environment is fierce. The company is guided by customer needs and actively seeks solutions in different situations and environments. In the first three quarters of 2020, the company achieved revenue of 2,827 billion yuan, an increase of 5.16% over the previous year, and net profit of the mother was 133 million yuan, an increase of 7.31% over the previous year.
It specializes in automotive fine chemicals, and customer coverage and product coverage continue to rise. The company has long maintained deep cooperation with major suppliers in the chemical industry such as BASF in Germany, Dow DuPont in the US, Afton in the US, BP in the UK, Unicorn in Korea, and SK lubricants in South Korea. The products cover automotive antifreeze, brake fluid, adhesives, engine lubricants, power steering oil, automatic transmission oil, fuel additives, glass cleaning fluid, four-element catalysts, etc. At present, the company has successfully become a stable supplier to more than 50 downstream automakers, including well-known automakers such as FAW Volkswagen, SAIC Volkswagen, and SAIC-GM. At the same time, it has developed many NEV customers such as Tesla, NIO Auto, Byton Motor, WM Motor, Singlepoint Motor, and Xiaopeng Motor, which fully demonstrates that the company's sales channels are stable and high-quality and have good profitability.
Vehicle electrification expands demand for rubber products. In terms of rubber products, with the increase in automobile electrification, demand for rubber products from new energy vehicles has increased, opening up market space for the company's existing products. The company's joint glass glue localization project with DuPont Dow has made great progress. Following the steady progress of related process improvements, local production of 5 product models has been completed. At the same time, the company is actively developing new energy vehicle customers and has successively obtained targets from NEV manufacturers such as Shanghai Tesla and China Aircraft Zhijun, including glass glue, structural adhesive, etc. In addition, the company was nominated by FAW-Volkswagen and Audi to begin mass supply of silicone for battery packs in 2020 to develop incremental business for the company.
The catalyst business has benefited from implementation in Country 6. The company's products mainly involved in reducing automobile exhaust emissions include fuel cleaners, three-element catalysts, and four-element catalysts. The four-element catalysts supplied by the company to the country six have increased the function of cleaning up solid particles compared to the ternary catalysts. Technically, they are more advanced and reliable than the three-element catalysts supplied. The implementation of the national six standard will have a positive effect on the company's sales of four-yuan catalysts, and the company's catalyst business will grow significantly.
Profit forecasts. We expect the company's EPS in 2020-2022 to be 0.29, 0.34, and 0.39 yuan/share, respectively. The company is a leader in automotive fine chemicals. We gave a certain premium, 17-20 times PE in 2021, corresponding to a reasonable value range of 5.78-6.80 yuan (corresponding PB is 1.26-1.48 times. Referring to PB-ROE, we think the valuation is at a reasonable level), covering the “superior market” rating for the first time.
Risk warning. Risk of fluctuations in raw material prices; macroeconomic downturn.