Incidents:
The company recently received a “Supplier Targeted Notice” from Anhui Jianghuai Automobile, confirming that the company is a supplier for developing components such as ECU components, gas rail assemblies, pressure reducer assemblies, and low pressure filters for the 3.0L natural gas engine to match the Kangling vehicle project.
The natural gas N2 model has been targeted for the first time, opening a new chapter in the natural gas business. The components related to the fixture now mainly match the 3.0L natural gas engine of the Kangling vehicle project. This engine is a modification of the diesel engine itself and is mainly used in the N2 model. Currently, the N2 market is mainly for diesel models. Successful development of natural gas models will greatly reduce operating costs for car buyers. The targeting of this project reflects the market's recognition of the company's R&D capabilities, supply chain capabilities and product quality, and helps improve the market competitiveness of the company's products.
Benefiting from the expansion of the natural gas business, the company's revenue increased in the first three quarters. The main product of the company's natural gas business was the dual-fuel engine management system for the N1 model of the natural gas light truck. The system added ECU, pressure relief valve assembly, gas injection rail assembly, etc. to the gasoline vehicle EMS, and the value of bicycles increased significantly compared to gasoline vehicles. Since this year, due to falling natural gas prices and strong downstream demand, the company's dual-fuel EMS system sales have increased dramatically, driving the company to achieve revenue of 699 million yuan in the first three quarters, an increase of 31.88% over the previous year.
The natural gas light truck and passenger car business is expected to form a two-wheel drive
The penetration rate of N1 models of natural gas light trucks continues to increase. Combined with the addition of new N2 models, it is expected to bring continued growth to the company's natural gas business. In the passenger car business, the company has already entered independent brands such as Ideal and has begun to expand. We believe that the natural gas light truck and passenger car business are expected to jointly drive the company's performance growth.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2023-2025 to be 11.1/14.3/1.85 billion yuan, up 56.0%/28.3%/29.9% year on year, net profit of 0.68/1.55/277 billion yuan, year-on-year increase of 0.88%/129.94%/78.21%, EPS of 1.31/3.00/5.35 yuan/share, respectively, and a 3-year CAGR of 60.5%. Given that the value of bicycles in the natural gas light truck business has increased significantly compared to gasoline vehicles, the company is expected to fully benefit from the increase in the penetration rate of natural gas light trucks. Referring to comparable company valuations, the company was given 45 times PE in 2024, corresponding to the target price of 135 yuan, maintaining the “buy” rating.
Risk warning: The customer's product development is blocked, and the fixed-point project is postponed or terminated due to model adjustments; the actual product delivery time, supply price, and quantity are yet to be determined.