Core views:
BAIC's electric vehicle production and sales platform
In 2013, BAIC New Energy was divested from Beijing Automobile (1958.HK) and became an independent NEV manufacturing and sales platform under the BAIC Group. In 2018, BAIC New Energy was restructured and listed, referred to as BAIC Blue Valley for short.
In terms of production models, BAIC Blue Valley purchases raw materials such as batteries, electronic controls, motors, etc. from suppliers such as Pryde, Funeng, Guoxuan Hi-Tech, BAIC Taiyang, and Xinrui Technology, and carries out vehicle production through independent production or cooperative production with BAIC Motor. Under the independent production model, BAIC Blue Valley uses its own production lines to produce new platform models, mainly mini electric vehicles such as EC and LITE; under the cooperative production model, BAIC Blue Valley sells power systems to BAIC Motor, and BAIC uses traditional fuel vehicle production lines and sells them to BAIC Blue Valley after production, mainly electric cars and SUVs above grade A0, such as EVs, EX, EU, EH, etc.
In terms of sales models, electric vehicles produced independently by BAIC Blue Valley and produced cooperatively are sold abroad through the BAIC Blue Valley Sales Company. BAIC New Energy has built a national independent NEV sales network through self-built channels and joint ventures with famous domestic dealers. In terms of self-built channels, BAIC New Energy has formed a relatively complete sales network through a combination of 4S store+secondary network+city showroom. In cooperating with dealers, good sales relationships have been established with BAIC Group, Pangda, etc.
Leading sales, continuous product upgrades
In order to adapt to the development trend of the electric vehicle industry, BAIC Blue Valley has accelerated product restructuring and formed two major product matrices. One is an upgraded new generation of high-end products based on the “Darwin System”, and the other is a cost-effective and popular national pure electric vehicle product.
In 2018, the company achieved sales of 158,000 units, an increase of 53% over the previous year, ranking first in sales of pure electric vehicles in China for six consecutive years. Among them, the proportion of sales of the company's high-end products increased dramatically, and the upward effect of the product was beginning to be shown. Product structure optimization: sales of models above A0 class reached 42%, an increase of 50% over the previous year. Among them, A-class models accounted for 20.3%, with a year-on-year increase of 113%. The EU series of A-class sedans sold 32,288 units, an increase of 176% over the previous year; the EX series of SUVs sold 28,680 units throughout the year, an increase of 528% over the previous year. The company strengthened the upgrading of national automobile products, launched the EC series upgraded products EC220 and EC3, maintained the continued popularity of the EC series, and maintained the lead in the A00 class market for two consecutive years.
In the first quarter of 2019, the company produced 2,852 vehicles, a year-on-year decrease of 88.30%, and sold 25069 vehicles, an increase of 20.46% over the previous year. As can be seen from production and sales data for the first quarter, the proportion of products produced in collaboration with BAIC increased markedly, sales increased rapidly, and the company's product structure was further upgraded to better adapt to the new round of industry subsidy policies.
Investments help future development, various models are being researched
The company is investing in a number of major investment projects, which have the potential to become the next BYD.
In July 2017, BAIC New Energy carried out a B round of financing. The investment projects included vehicle construction plants (2.4 billion), lithium battery assets (2 billion), product research and development (456 million), and technology development (2,703 million). In 2018, it is planned to invest 4.620 billion dollars in the restructuring of supporting fund-raising projects. The investment projects include science and technology centers (1,881 million) and product research and development (2,749 million).
After the investment project is completed, BAIC Blue Valley will: add 100,000 vehicle production capacity, 3GWh battery module and battery pack production capacity; enhance product competitiveness. The models under development include C51EB, C40DB, C35DB, N60AB, and N61AB, corresponding to A-class SUVs, A-class compact electric cars, A0 and electric vehicles, A+ class CROSS; technology advances in lightweighting, battery system integration and utilization, and integrated powertrain systems; and provide a better R&D office environment.
Profit forecasting and investment ratings
We expect the company's EPS in 2019-2021 to be 0.06 yuan, 0.13 yuan, and 0.21 yuan respectively, and the corresponding dynamic price-earnings ratios are 172.72 times, 77.16 times, and 46.64 times, respectively. Give a “carefully recommended” investment rating.
Risk warning
The development progress of new models fell short of plans; market expansion fell short of expectations.