Huaan Xinchuang released its report for the first quarter of 2024: in the first quarter of 2024, the company achieved operating income of 185 million yuan (-38.66% year over year); net profit to mother of -10 billion yuan (-268.54% year over year); net profit without return to mother -0.1 billion yuan (-423.17% year over year)
Key points of investment
Policies drive the growth of the NEV market, and demand for iterative smart cockpits is rising
On April 24, 2024, the State issued the “Vehicle Trade-In Subsidies Implementation Rules”, which grant a one-time replacement subsidy of 10,000 yuan to users who scrap fuel vehicles or NEV passenger cars with national emission standards of 3 or below and buy new NEV passenger cars. This measure will effectively shorten the replacement cycle for domestic consumers, promote sales volume in the new car industry, and increase domestic car ownership. The company is deeply involved in the field of automotive cockpit electronics and can benefit from growing downstream demand. As smart cockpit configurations are the main purchasing conditions for NEV consumers, driving car manufacturers to continuously change new car-related configurations. Currently, the penetration rate of intelligent cockpit configurations in China is about 48.8%. The penetration rate of the new smart cockpit car market in China is expected to exceed 75% by 2025, and the market size will exceed 160 billion yuan by 2030.
Full-chain intelligent manufacturing plant phase 1 trial production, cost advantage enhances competitiveness
The first full-chain production line of the company's automotive LCD module and smart cockpit display system intelligent manufacturing project in Nantong successfully entered trial production in March 2024, marking that the company's strategic layout in upstream resource integration, integrated R&D and design and full-chain manufacturing has been fully completed, and the company's vertical integration capabilities have been further improved. The report for the first quarter of 2024 shows that the revenue and share of the company's smart cockpit terminal business continues to increase. Currently, the trend of price cuts for new energy vehicles has not abated, and automobile manufacturers have higher requirements for cost control. The company's full-chain production project has reduced costs such as logistics, process management and operation to effectively meet downstream cost reduction needs. It has obvious advantages in competition with traditional Tier 2 suppliers. In the future, it is expected that the market share will further increase after the project is fully delivered.
Sales and management expenses are rising, and on-hand orders are plentiful
The company has further expanded its sales and management team to speed up the establishment of an intelligent manufacturing strategy. The company's sales expenses for the first quarter of 2024 were 0.04 billion yuan, up 26.29% year on year, and management expenses were 210 million yuan, up 25.39% year on year. Combined with the company's full range of orders, it has received a fixed amount of 4 billion yuan for new projects since April 2023. The project cycle ranges from 2 to 5 years, including cooperation with customers such as Changan, SAIC-GM Wuling, and Xiaopeng. Subsequent orders will successfully transform revenue, and the company's performance will explode.
Profit forecasting
The company's revenue for 2024-2026 is 20.53, 41.89, and 4.937 billion yuan, respectively, and EPS is 1.76, 6.71, and 9.25 yuan respectively. The current stock price corresponds to PE of 21, 5, and 4 times, respectively, maintaining a “buy” investment rating.
Risk warning
The downstream automotive industry's prosperity declined; continuous R&D and innovation capabilities were insufficient; the competitive pattern in the automotive cockpit electronics industry deteriorated; the construction progress of the project fell short of expectations and the expected benefits after commissioning