Key points of investment
Leading automotive intelligent diagnosis, building a second growth curve
Established in 2004, Daotong Technology is a major manufacturer in the global automotive intelligent diagnosis industry. Its products cover more than 70 countries and regions, and is an important participant in the global automotive aftermarket. The company's main business includes two major segments: traditional vehicle diagnosis business and new energy charging pile business. Among them, the automotive diagnostic business is the company's basic market, which accounts for the largest share of the company's revenue (accounting for about 76% in 2023). Charging pile products began contributing revenue in 2022, which is the company's second growth curve.
Automobile diagnosis business: The traditional business contributed cash flow, and the ADAS business led the growth. The company's automotive diagnostic business continued to contribute stable cash flow to the company. Prior to the deployment of the new energy charging pile business in 2021, the company's gross margin level remained high, and the net interest rate level remained at 25%. The company has been deeply involved in overseas markets for many years. Its main competitive advantage is excellent product strength and high cost performance, and its leading position is expected to be maintained in the future.
The overseas automobile aftermarket, especially the US market, is mature and growing steadily. It is mainly affected by three major driving factors: 1) an increase in car ownership; 2) an increase in the average age of cars; and 3) an increase in the degree of electronization and intelligence of automobiles. The company's ADAS product line is expected to benefit from the increase in the penetration rate of intelligent driving and continue to grow rapidly.
New energy charging pile business: Entering a period of volume growth, there is still a lot of room in the long term. The global electric vehicle penetration rate continues to increase. Demand for products and professional technology for charging infrastructure and related maintenance services has increased, and the development of the new energy charging pile industry has ushered in huge opportunities. According to IEA data, the number of public piles in the US is expected to reach 380,000, 920,000, and 1.72 million in 2025, 2030, and 2035, respectively; the number of charging stations in Europe is expected to reach 106, 175, and 2.74 million in 2025, 2030, and 2035, respectively. Against the backdrop of rapid growth in overseas charging pile demand, we expect the company's revenue from charging stations to increase by 80%, 60%, and 50% year-on-year in 2024-2026.
Profit forecasting and valuation
We forecast that the company's revenue for 2024-2026 will be 39.84, 50.34, and 6.274 billion yuan, respectively, up 22.54%, 26.36%, and 24.63% year-on-year, respectively; net profit to mother will be 4.95, 6.48, and 835 million yuan.
We used the relative valuation method to value the company and gave the company 30 times PE in 2024, with a target market value of 14.912 billion yuan, a corresponding target price of 33 yuan, and the target price corresponding to 2024-2026 PE multiples of 30, 23, and 18 times, respectively. Covered for the first time, a “gain” rating was given.
Risk warning
The implementation of new energy charging piles and ADAS products fell short of expectations; market competition intensified; changes in the policy environment; tariffs increased dramatically