The company's main business is motor vehicle testing system, actively integrate operational business. The company is the main provider of overall solutions in the field of motor vehicle testing in China. it is a small number of integrated service leaders in China that integrate motor vehicle testing system, networking supervision system of testing industry, motor vehicle exhaust remote sensing detection system and intelligent driver examination and training system. In recent years, through the transformation of mergers and acquisitions, the company has extended to the field of downstream vehicle testing service operation. Thanks to the increase in car ownership and the release of demand brought about by the upgrading of environmental inspection in 2019, the company achieved operating income of 973 million yuan in 2019, an increase of 84.3% over the same period last year, while the net profit of the parent company was 189 million, an increase of 50.6% over the same period last year.
Passenger cars usher in the testing cycle, and the market space is huge. By the end of 2019, the average age of owned vehicles in China is about 4.9 years, which will usher in the peak period of testing. Although affected by the new rules, the demand for car testing will fall by 7% in 2021 compared with the same period last year. With the continuous growth of car ownership, the car testing market may return to positive growth after 2021, and we expect the compound annual growth rate to be about 11% from 2022 to 2025. By the end of 2019, the number of testing stations per 10,000 vehicles in China is only 0.42, compared with 3.51 per 10,000 in Japan and 2.50 per 10,000 in the United States. According to the standard developed countries, it is estimated that the number of domestic testing stations will reach 52000 in the future, the potential market space of the detection system is about 130 billion yuan, and the average annual operating income is about 130 billion yuan. And after opening the motor vehicle testing market pricing, the price is expected to continue to rise, the industry volume and price catalysis coexist.
International comparison, acquisition and expansion is the best way for the testing industry. Acquisition and expansion model has been verified: Opus through the continuous acquisition of vehicle inspection companies, quickly occupy market share to become the industry leader model is established and can be used for reference. The combination of regional expansion and multi-business has opened up a new situation: Opus has not only engaged in vehicle inspection business, but also developed intelligent vehicle support business; Applus+ is a leading company in vehicle inspection, but its vehicle inspection business accounts for only 22% of its total income. The mode of multi-regional development and multi-business operation is an important strategy of giant enterprises. Brand strategy is a long-term route: Applus+ 's four businesses belong to the industrial testing industry, complement each other, build a reputation for each other, jointly build the company's brand in all segments of the industry, and steadily follow the long-term brand development route. Image building attracts potential customers: Applus+ not only focuses on investing in innovation and proprietary technology as the cornerstone of industrial enterprises, but also makes great efforts to develop corporate leadership and improve employee satisfaction, so as to improve corporate reputation and bring more potential business for enterprises.
Endogenesis + M & A, transformational operation. Through the transformation of mergers and acquisitions, the company has extended to the field of downstream motor vehicle testing service operation. The company formally entered the field of motor vehicle inspection and operation by participating in the establishment of Texas Changsheng New Kinetic Energy, Linyi New Kinetic Energy, the acquisition of 70% equity in Xing Automobile Inspection, the 70% equity interest in Linyi Integrity and part of Zhong Jian Automobile. Linyi upright average capacity utilization rate of 41.5%, net interest rate as high as 37%. Through mergers and acquisitions to cultivate high-quality testing stations, the company's profitability will be greatly improved.
Profit forecast and investment advice: we expect the company to achieve operating income of 9.8,12.6 and 1.69 billion yuan and net profit of 200 million yuan, 300 million yuan and 470 million yuan from 2020 to 2022, an increase of 5%, 50% and 57% over the same period last year. Considering the impact of additional issues, the corresponding EPS is 1.03,1.34,2.09, and the corresponding PE is 36,28,18.
It is estimated that from 2020 to 2025, the company's parent net profit grew at an average annual compound growth rate of 40%. We give the company a valuation of 40 times PE in 2021, corresponding to the target share price of 53.47 yuan per share, which is 43% higher than the current stock price.
Risk tips: mergers and acquisitions are not as expected; testing policy risks; increased competition in the testing industry; testing prices are not as expected; new energy vehicle testing is not as expected.
