Yap Co., Ltd.: The world's top three fuel tank suppliers. The transformation is poised to begin. Yap Co., Ltd. is one of the top three fuel tank suppliers in the world. Customers include German, Japanese, American and independent brands, and has self-built production capacity deployments in Europe, America, and Asia around the world. In 2020, the company's revenue reached 8.9 billion yuan, and the net profit of its mother reached 506 million yuan. In the past three years, the company's profit to its mother increased by 14.8%. Whether judging from its customer layout, operating quality, or financial performance, Yap shares are excellent. The special nature of the fuel tank track has caused the market to ignore Yap's underlying capabilities and development potential as an excellent enterprise. Yap is expected to find a second round of development in the fuel tank upgrade window.
Short to medium term: Product upgrades are combined with increased market share to support performance growth. According to IHS Markit forecasts, by 2030, fuel+hybrid will account for about 68%, of which hybrids will account for more than half. Fuel will still have a period of stable development for the fuel tank market for quite some time. Upgrading from country 5 to country 6, the value of the company's bikes increased from 692 yuan to 890 yuan. As hybrid and plug-in hybrid models require high fuel tank pressure, the bicycle value of fuel tank products is expected to increase further. We expect hybrids to account for 25% and 36% respectively in 2025 and 2030, and the value of hybrid fuel tank bikes is expected to reach 1,100 yuan. The fuel tank market space is expected to reach 74.8 billion and 75.5 billion yuan respectively in 2025 and 2030, up 7% and 8% respectively from 2020. The fuel tank industry is relatively concentrated, with the top four markets accounting for about 56%. The market share of Yap Co., Ltd. has steadily increased over the past few years, from 9.3% to 11.4%. Currently, the company has received new orders from Toyota in India and Audi in Germany, and the market share is expected to increase further.
Looking at the future transformation potential of Asia and the Pacific from the perspective of underlying capabilities
Material capabilities, fluid engineering, and system integration capabilities are core underlying technologies that fuel tank companies can transform and extend. Judging from the strategies of global fuel tank companies, the main strategy is to rely on the transformation of materials to fuel cells, the extension of the valve pump capacity integrated into the fuel tank to thermal management, and the extension to the cleaning system based on fluid engineering. Yap is expected to expand vertically in the direction of vehicle “energy storage” and develop pure electric composite battery cases and fuel cell hydrogen storage tanks. The domestic market for both is expected to exceed 5 billion and 7 billion respectively by 2025. At present, the case on the company's battery pack has been certified in advance by the OEMs and is capable of mass production. The Type IV hydrogen storage tank is being verified on board the vehicle. Currently, Yap still has 40% surplus production capacity in the fuel tank sector. The company's capital expenditure has declined rapidly in the past three years, and fixed assets have declined rapidly since 2019. The company's operating cash inflow reached 1.6 billion in 2020, and the monetary capital in hand reached 1.3 billion. We have strong capital reserves and are ready for transformation.
Investment advice: steady growth in performance, opening up space for transformation
In terms of operation and management, Yap Co., Ltd. is not inferior to Fuyao and Minshi's positions in their respective fields. The fuel tank still has upgrade characteristics in the medium term, and maintaining stable market space gives the company sufficient development and transformation window. We believe that Yap Co., Ltd. is expected to develop and launch new business with its accumulated underlying technical capabilities, customer channels, and production capacity guarantees in fuel tanks, and achieve the company's business transformation. The company's EPS for 2021, 2022, and 2023 is expected to be 1.26 yuan, 1.49 yuan, and 1.76 yuan respectively. The corresponding valuations are 11.6X, 9.8X, and 8.3X, respectively. It was covered for the first time and given a “buy” rating.
Risk warning
1. The impact of chips has caused global production and sales to fall short of expectations;
2. The rate of penetration of pure electric vehicles has exceeded expectations.
