Event

The company recently announced stock options and restricted stock incentive plans for 2021, granting 1.272 million stock options to a total of 43 middle managers, core business personnel and core technical personnel, accounting for 0.49% of the total share capital on the date of the plan announcement. The number of restricted shares granted is 5.6 million, accounting for 2.16% of the total share capital on the date of the announcement of the plan.

Brief comment

With a three-year compound growth rate of 40%, equity incentives demonstrate confidence and mobilize the enthusiasm of management. the assessment year of this incentive plan is three fiscal years from 2021 to 2023, and the assessment target of each fiscal year shall meet one of the net profit or revenue indicators:

2021: based on operating income / net profit in 2020, the growth rate of operating income / net profit in 2021 is not less than 40% and 65%.

2022: based on operating income / net profit in 2020, the growth rate of operating income / net profit in 2022 is not less than 80% and 110%.

2023: based on operating income / net profit in 2020, the growth rate of operating income / net profit in 2023 is not less than 140% and 170%.

At present, the 20-year annual report has not been disclosed. We estimate the revenue and profit in the next few years on the basis of Wande's unanimous expectation. Assuming that the revenue base of the company in 2021 is 568 million yuan and the net profit base is 65 million yuan, if the incentive mechanism is triggered, the company's revenue should reach 7.95,10.22 and 1.363 billion yuan, and the company's net profit should reach 1.07,1.37 and 176 million yuan. The corresponding compound growth rate of revenue is 33.9%, and the net profit is 39.4%. The company maintains confidence in maintaining high growth in future performance. This time, the new equity incentive plan further improves the corporate governance structure and the company's long-term incentive mechanism. Taking revenue and net profit as the growth goal, strengthening the binding of core managers and shareholders' interests will help the company to maintain the leading position of turbocharger accessories. The follow-up is expected to escort high growth.

Company orders continue to pick up, and fundamentals are gradually repaired.

In 2020, due to the influence of the COVID-19 epidemic at home and abroad, the company's revenue and net profit negatively increased compared with the same period last year. With the gradual relief of the epidemic in the past two quarters, the company's customer orders continued to pick up, and its operating income reached 164 million yuan in the third quarter. The cumulative operating income in the first three quarters narrowed sharply to 2.46% compared with the same period last year, which has basically returned to the level of the same period last year. In terms of gross profit margin, since the third quarter, orders have accelerated and the company's capacity utilization has been effectively improved. at the same time, the company has implemented strict production controls, so that the gross margin began to recover to 34.23% in the third quarter. At the same time, through effective cost control, all expenses of the company have decreased compared with the same period last year, and the expenses during the period have decreased by 16.46% compared with the same period last year, of which management expenses and sales expenses have decreased by 19.18% and 25.02% respectively.

Based on the R & D accumulation and technology of homologous metal materials, the downstream should continuously enrich the scene that the company currently contributes mainly to the exhaust valve assembly and intermediate shell for turbochargers, as well as other automotive product lines, such as passenger vehicle exhaust system, commercial vehicle braking system key parts. Including valve body and valve plate products, industrial hydraulic pump series hydrostatic transmission pump parts needed in the industrial system field have made further breakthroughs. More abundant product forms and expanding new business are expected to provide steady performance support for the company's future growth.

In the context of the continuous improvement of turbocharging permeability, the company gives full play to the accumulation of material research and development and material molding process, and actively expand the needs of different downstream scenarios. According to the company's annual report, it has entered the supply chain of Foggia, the world's largest supplier of exhaust systems, and has become a supplier of its key exhaust system parts, providing key parts of automobile braking systems to the commercial vehicle field, including valve bodies and valve plates, and supplying industrial hydraulic pump series hydrostatic transmission pump parts to the industrial system field. The company completed the acquisition of Wuxi Sheng Mike in the fourth quarter of 2020, and is expected to continue to expand new sensor business in the future. Richer product forms and expanding new business are expected to provide solid performance support for the company's future growth.

Profit forecast

The company is the leader of turbocharger accessories and is expected to continue to benefit from the uplink of the industry in the next five years. in addition, the company relies on material development and molding technology to open up new business areas, actively layout downstream application scenarios except auto parts, and develop more downstream customers. we expect the company's turbocharged parts business to grow by-13%, 15% and 15% in the next three years. The growth rate of exhaust system is 165%, 342% and 96%, and the growth rate of molding equipment is 15%, 18% and 19%. From 2020 to 2022, the company's EPS (dilution) is 0.25,0.49,0.76 yuan respectively, and PE is 53.5x, 27.2x and 17.6x respectively.

Risk hint

The risk that the sales volume of the automobile industry falls short of expectations; the aggravation of overseas epidemic affects the risk of the company's overseas business; and the risk of mass production of new projects falls short of expectations.