The company grasps industry trends in energy saving and emission reduction, and relies on long-term development experience in the field of EGR and precision components to explore new markets such as passenger car plug-in hybrid EGR, motor cores, and natural gas engine jet rails, which has become a new driving force for the company's performance growth. In November 2022, the company completed fixed financing of 716 million yuan to expand motor core production capacity and improve supply capacity.
The product targets energy upgrading needs such as electrification and natural gas. The forward-looking layout gained a first-mover advantage and successfully developed the motor core market after the merger and acquisition of Microresearch Precision in 2018. At the same time, EGR products are entering the passenger car plug-in hybrid market, keeping abreast of the plug-in hybrid growth trend. In 2017, they jointly developed a “natural gas injection system” with Bosch, and actively carried out a “fuel substitution” strategic transformation. Forwardly lay out the energy upgrade market and obtain a first-mover advantage in products.
The management has rich industry experience and has established good cooperation with leading companies in the industry. Many management members have worked for companies such as Bosch and Weifu Hi-Tech, and have rich industry experience to help customers expand. Furthermore, many years of product supply have established strong customer stickiness.
Motor core: Welcome to the second wave of electric vehicles from new forces and traditional independent brands. The auto parts industry has settled down over the years to form a brand and technical advantage. The main customers are foreign brands and joint electronics, and terminal car companies such as BYD, Geely, NIO, SAIC, Chery, and Ideal. New forces and traditional independent brands are promoting new energy to drive the shipment of motor cores.
Passenger vehicle hybrid EGR: Hybrid models increase the share of new energy vehicles and replace them with domestic ones, driving strong business growth
In 2023, hybrid vehicles accounted for 31% of new energy passenger cars, an increase of 8 percentage points over the previous year. The company has become a supplier of EGR products for hybrid models such as BYD, Geely, Chery, Guangzhou Automobile, and Dongan, which is expected to drive strong business growth under the hybrid trend.
Natural gas jet rail: The operating economy of heavy natural gas trucks is obvious. Cooperate with Bosch to enjoy industry dividends, maintain a high level of price difference between natural gas and diesel, and have obvious economic advantages in the operation of heavy natural gas trucks. In 2023, sales of heavy natural gas trucks reached 152,000 units, up 311% year on year; penetration rate reached 16.7%, up 11.1 percentage points year on year. The company cooperates deeply with Bosch and is expected to enjoy the dividends of the heavy natural gas truck industry.
Profit forecasting and valuation
The company's revenue for 2023-2025 is estimated to be 18.18/26.31/3.267 billion yuan, YOY is 58.3%/44.7%/24.2%, respectively; the estimated net profit for 2023-2025 is 1.50/2.33/ 303 million yuan, YOY is 98.9%/54.9%/30.2%, EPS is 0.65/1.01/1.31 yuan/share, corresponding PE is 22.07/14.25/10.94 times. First coverage, giving a “buy” rating.
Risk warning
Raw material costs have risen; the penetration rate of new energy vehicles has fallen short of expectations; gross margin is under pressure due to increased competition among automakers; heavy gas truck penetration falls short of expectations; market development falls short of expectations, etc.