Key points of investment
The company released 2020 results:
The company achieved revenue of RMB 2.07 billion (same below), -2.9% year on year; gross profit of 680 million yuan, +17.9% year on year; net profit of the mother was 330 million yuan, +58.6% year on year; performance was in line with our expectations.
The 2H2020 performance was strong, and the recovery gradually came to fruition:
In the second half of 2020, there was a strong rebound in the global automotive market, and the company achieved revenue of 1.25 billion yuan, +13.0%/+53.2% over the same period last year. By market, the company's 2H revenue in China reached 550 million yuan, +13.0%/+59.6% over the same period last year, and the annual revenue share increased to 43.4%; 2H revenue in the North American market was 400 million yuan, +16.1%/+50.5% year on year, and the share of annual revenue increased to 31.8%; 2H revenue in the European market recorded 250 million yuan, +13.4%/+44.7% year on month, and the revenue share fell slightly to 20.6%.
Gross margin has rebounded, and cost management has achieved remarkable results:
The company's 2H2020 gross margin recorded 35.1%, +6.2/+5.4pct over the same period, mainly because: 1) revenue growth increased the scale effect; 2) employee costs were -19.5% over the same period; 3) the overall yield rate increased from 88.6% in 2019 to 89.5%; 4) the impact of production interruptions at the Wuxi base gradually subsided. At the same time, the company actively controls expenses. The sales+management expenses ratio in 2020 was 16.7%, compared to -0.8 pct compared to -0.8 pct. Among them, the sales+management fee ratio in the second half of the year was 12.6%, compared to -2.1/-10.3pct compared to the same period last year, with remarkable results.
There are sufficient orders in hand, and new energy customers are worth looking forward to:
By the end of 2020, the company's existing contract amount for the next 5 years was 10.5 billion yuan, and there were sufficient orders on hand.
If we look at order visibility (including predicted orders), the company's revenue in 21/22 is expected to exceed 2.5 billion and 3.1 billion yuan. In the future, the company will focus on developing businesses related to new energy customers. Of the new orders received in 2020, 34% were new energy orders. The company has established cooperation with Tesla, NIO, Xiaopeng, Weimar, etc. Among them, Tesla, as a key customer, is expected to contribute close to 10% of related revenue in 2021, entering the top five customers. Tesla's endorsement will help the company continue to expand its influence in the field of new energy. As the electrification trend accelerates, the company is expected to gradually upgrade to a Tie-One manufacturer and increase its share.
The target price was raised to HK$7.0 to maintain the “buy” rating:
We updated our earnings forecast per share for 21/22 to $0.46/0.66 and raised the target price to HK$7.0, corresponding to 13 times PE in '21, maintaining the “buy” rating.
