Main points of investment
Lead prices are higher than the same period last year, while gross profit margins have fallen. 2017 interim results: revenue increased by 6.87%, gross profit decreased by 0.75% to 12.81%, and net profit decreased by 26.10% compared with the same period last year. Lead prices rose sharply compared with the same period last year, while the price increase of the company's lead-acid battery products lagged behind, and the gross profit margin fell; management intended to control the scale of lithium battery sales, lithium battery sales declined; three fees and expenses continued to increase, and finally the net profit decreased.
One of the lead-acid battery duopolies, the average sales price has increased. Chaowei Power is one of the duopolies of lead-acid power batteries in China. Affected by the rise in lead prices in the first half of 2017, the average price of lead-acid batteries rose 20%, about 135 yuan per battery, while shipments decreased by about 10%.
Take the initiative to control the sales scale of lithium electricity and make a good technical reserve to look forward to the outbreak of the market. The company expects that the lithium battery market will basically be completely replenished around 2020, thus entering a pattern of free competition in the market. At that time, the company will rapidly expand the scale of lithium power production. At present, the best response strategy for the company is to make a good reserve of technology and capacity. Wait for the outbreak of lithium-ion battery market demand.
Actively layout the new areas of battery, the effect of differentiation strategy is prominent. The company adheres to the policy and strategy of product competition and differentiation. in addition to the traditional lead-acid batteries, the company is also actively laying out new areas of black gold high-energy batteries, energy storage batteries and start-stop batteries, which are expected to become new growth points for the company in the future.
Our point of view: as one of the duopolies of lead-acid power batteries in China, Chaowei Power always adheres to the differentiated product competition strategy, and continues to strengthen research and development and enhance brand value. now we have successfully laid out three new areas: black gold high-energy battery, start-stop battery and energy storage battery, and have achieved initial results. In the future, with the outbreak of the demand-side market, new products are expected to become a new growth point. We expect the current stock price to be about 6-7 times PE corresponding to 2017 results, and investors are advised to pay attention.
Risk tips: fierce competition, lower gross profit margin; lead prices fluctuate more than expected