Investment logic
The company mainly provides network connection (driving recorder) and intelligent products (ADAS, advanced driving assistance system) for commercial vehicles. The main customers are Shaanxi Automobile, Foton, Sany, Valin, Sinotruk, etc., with an annual income of 460 million yuan and a net profit of 88 million yuan.
Policy-driven product upgrading and expansion, the company takes advantage of the wind to take off. The policy is the core factor driving the configuration upgrading of commercial vehicles. Driven by the policy, the value of the company's pre-loaded Internet of things products (accounting for about 50% of revenue) is expected to increase from 2000 yuan to 2000 yuan, of which the new national standard driving ASP for driving recorders will be raised from 500 yuan to 1500 yuan (expected to be implemented in October 21), and the new environmental protection OBD for heavy truck national six emission standards will be further increased by 500 yuan (expected to be implemented in July 21). Under the background of the government's regulation of slag trucks and general cargo heavy trucks, the ADAS business (2000-7000 yuan per bike) is expected to achieve volume in the front and rear loading markets. In addition, the company develops the controller business, the industry leader Jingwei Hengrun's income in 2020 is 1.8 billion yuan, the income compound growth rate is more than 40%, the industry accelerates domestic substitution, the company is expected to rely on customer advantages to share the market cake. We estimate that income is expected to nearly triple in the next three years.
With emphasis on R & D and manufacturing, the competitive advantage is obvious. First of all, the company is a veteran of the communications industry, founded Chuling Information (300250.SZ, the main communication access system) in 1999, and founded Hongquan Wulian for the second time in 2009, with rich experience in technology and management. Secondly, the company's gross profit margin is nearly 20 percentage points higher than that of its peers, which mainly comes from the high self-control rate and cost control ability of the product module; the third is the customer advantage, which covers four of the top five in the industry. Shaanxi Automobile and Futian are the first supply, and the market share of the company's network-linked products is about 30% in 2020; the company's new development of heavy truck and Sany once again confirms the company's competitiveness, and the market share is expected to further improve. Fourth, the company focuses on R & D, and R & D expenditure accounts for more than 15% of revenue, which is much higher than that of competitors (about 5% and 8%, respectively). Fifth, team incentives are better. 9.24% of the company's employee shareholding platform will implement equity incentives in 2021 (1.5% of the total equity), with a target net profit of no less than 11,000 million yuan in 2020-2022.
Investment advice and valuation
It is estimated that the company's homing net profit from 2021 to 2023 is 1.2 million yuan, 160 million yuan, an increase of 35% over the same period last year, 37% and 25%, respectively, and the corresponding EPS is 1.2 yuan, 1.6 pound, 2.0 yuan, respectively. With reference to comparable companies, we give the company 40 times PE in 2022 with a target price of 64.81 yuan per share and a "buy" rating.
Risk
The risk that the policy implementation is less than expected; the risk that the chip shortage mitigation process is lower than expected; the risk that increased competition leads to a higher-than-expected decline in gross profit margin; and the risk that the company's new business expansion is less than expected.