Joining hands with seaport industry and finance to deepen the lightweight automobile business layout
The company issued an announcement. The subsidiary Haiyuan New Materials signed a “Strategic Cooperation Framework Agreement” with Seaport Industry and Finance. The two parties formed a strategic partnership to carry out strategic cooperation in the fields of new materials, new technologies, new processes, etc., to make positive contributions to the trillion-dollar NEV industry planned by Zhejiang Province, and strongly promoted the leapfrog development of China's automobile industry. Seaport Finance is a private equity investment platform owned by Zhejiang Seaport Investment and Operation Group. It focuses on sea-related and port-related shoreline integration, port and shipping services, transportation, energy, grain and oil, and commodity trade. This cooperation is beneficial for the two sides to integrate resources in terms of technology and capital, form complementary advantages, help the company seize opportunities for potential customers to expand production capacity and enhance sustainable development capabilities.
Results for the third quarter are expected to remain stable. The lightweight strategy continues to advance the company's three-quarter performance forecast. It is expected to achieve net profit of 6 to 8 million yuan in the first three quarters of 2018, a year-on-year decrease of 81.28% to 75.03%. The main reason for the change in performance is that the implementation progress of PPP public infrastructure carried out by the company's downstream customers fell short of expectations due to delays in the delivery time of the company's orders, a decline in export revenue affected by the trade war, and a decrease in gross margin due to rising prices of raw materials such as steel.
In the future, the company will continue to adhere to the important strategic direction of lightweight automotive products, actively maintain and serve existing core customers such as Geely, Ningde Era, Brilliance, BMW, Yutong, Dongfeng Liuqi, and at the same time actively explore other markets. It has successively won projects such as bottom protection panels from Opto China and BMW, and battery case covers from mainstream automotive power battery manufacturers such as Hefei Guoxuan (a wholly-owned subsidiary of Guoxuan Hi-Tech) and Sunwanda.
It has won many orders for lightweight cars, and I am optimistic about future development prospects
On August 10, 2018, the company issued an announcement that Haiyuan New Materials, a wholly-owned subsidiary, received a designated confirmation letter for SMC parts for the London Electric Vehicle Company's LCV project. Later, it will enter the project's modeling stage. It is expected to gradually enter the mass production stage in 2019. It is estimated that a total sales revenue of 511 million yuan to 864 million yuan will be achieved within 7 to 10 years of the life cycle.
According to the interim report, as of the disclosure date, the company had received orders totaling 1,405 million yuan to 1,758 million yuan, of which Geely's orders included 511 million yuan to 864 million yuan for LCV models and 450 million yuan for the MPC-1 project; battery box orders included 150 million yuan for the Ningde Era, 189 million yuan for Guoxuan in Hefei, and 65 million yuan in Xinwang; and Otuo bottom shield orders of 40 million yuan. We are optimistic about the future development prospects of lightweight business.
Profit forecast and investment rating: Considering the company's announcement to revise its performance forecast for the first three quarters, we adjusted the company's net profit for 2018-2020 from 90 million, 180 million and 346 million to 33 million, 79 million and 148 million yuan respectively. The adjusted EPS was 0.13 yuan, 0.30 yuan and 0.57 yuan respectively. The corresponding PE was 51 times, 21 times and 11 times, respectively, adjusted to the “increase in holdings” rating.
Risk warning: There is a possibility of changes in the implementation of matters covered in future strategic cooperation agreements; automobile weight reduction trends fall short of expectations; macroeconomic impact has led to performance falling short of expectations; equity pledge risks, etc.