\u3000\u3000 Wuxi Longsheng Technology Co.Ltd(300680) (300680)
Event overview
The company released the performance forecast for 2021: during the reporting period, the net profit attributable to the parent company is expected to be RMB 95-110 million, with a year-on-year increase of 77.0% to 105.0%, of which the net profit attributable to the parent company in 2021q4 is RMB 24-39 million, with a year-on-year increase of 0.8% to 64.1%. The annual net profit deducted from non parent company was 87-102 million yuan, with a year-on-year increase of 74.4% to 104.6%, including 305-355 million yuan deducted from non parent company in 2021q4, with a year-on-year increase of 27.0% to 125.7%.
Analysis and judgment:
21q4 continued to grow year-on-year, and the new energy business accelerated its volume
In 2021, the company's EGR and motor iron core businesses ushered in rapid growth, driving the net profit attributable to the parent company of 95-110 million yuan for the whole year, with a year-on-year increase of 77.0% to 105.0%. Among them, the net profit attributable to the parent company in 21q4 was 24-39 million yuan, with a year-on-year increase of 0.8% to 64.1%, a month-on-month increase of - 15.5% to 37.5%, deducting 19-34 million yuan, with a year-on-year increase of 27.0% to 125.7% and a month-on-month increase of - 30.8% to 22.9%. The year-on-year increase continued, and the month-on-month increase was not significant. It is expected to be mainly dragged down by the light truck market. Under the dual influence of the lack of core in the industry and the national five inventory vehicles, the production and sales of 21q4 China light trucks were - 19.2% and - 20.0% year-on-year respectively. At the same time, the rise of natural gas price also had a certain impact on the company's natural gas injection system business.
Looking forward to 2022, the contribution of light truck EGR of more than 3.5t to the company will be extended to the whole year. At the same time, the incremental contribution brought by heavy truck and hybrid EGR will form a strong support for EGR business. In terms of motor iron core business, the monthly shipment volume is expected to reach about 80000 sets. With the expansion of production capacity, the shipment volume is expected to rise to 1.5 million sets + in 2022, further helping the growth of the company.
Traditional main business focuses on EGR country VI upgrade bonus period
The company's traditional main business focuses on the EGR sector, focusing on three core products: EGR valve, cooler and throttle. The market share of the company in phase IV of China was once maintained at a high level, but the EGR business in phase V of China was under short-term pressure due to the adjustment of technical route. With the comprehensive switching of national VI emission standards from 2021, the EGR sector will usher in a period of rapid growth of policy dividends: 1) light truck: the main source of increment is more than 3.5t. Based on the original customer resources and technical advantages, the market share of the company is expected to reach 60%; 2) Heavy truck: the epidemic situation and Sino US friction accelerate domestic substitution. The company is expected to seize part of the market with its deep technical accumulation, and some customers are in the performance test stage; 3) Others: the fourth phase emission standard for non road mobile vehicles will be implemented from December 1, 2022, and is expected to contribute to the increment from 2022q4; The company pursues the strategy of developing both gasoline and diesel, and deeply explores the EGR market of hybrid vehicles. It is expected to usher in rapid growth in 2022 and continue to benefit from the penetration of hybrid vehicles.
Strategic layout new energy continues to benefit from the trend of vehicle electrification
The motor iron core is equipped with high-quality customers, and the acceleration of large-scale production is imminent. In 2018, the company acquired micro research precision, fully coordinated with market, technology and R & D, and successfully extended its business scope to the field of new energy vehicle drive motor iron core. At present, it has officially become a first-class supplier of a foreign electric vehicle and energy company. It began mass production in May 2021 and indirectly supported Weilai, SAIC, ideal Nissan and other vehicle platform projects. At the same time, the company also participated in the research and development of the new generation motor project of China's top new energy vehicle customers, and obtained the supplier fixed-point letter of two international platform customers, laying a solid foundation for the subsequent expansion of the iron core industry. In the medium and long term, we believe that the company will continue to benefit from the rapid growth of the industry and high-quality customer resources under the trend of automobile electrification, and there are opportunities for the company to penetrate into other high-end motor core applications in the long term.
Natural gas injection system is bound with Bosch, the third performance growth point. Since October 2017, the company has jointly developed the "natural gas injection system" project with Bosch. In October 2019, the company was appointed by Bosch supplier to undertake the manufacturing of core component "high flow natural gas nozzle" and supporting business of natural gas injection system assembly. In October 2020, the company officially entered the stage of small batch production, conforming to the general trend of natural gas as alternative fuel in the commercial field, In 2021, the natural gas injection system officially entered the stage of mass production.
Investment advice
The company has been deeply engaged in EGR business for many years, and the three core products of EGR valve, cooler and throttle are expected to increase rapidly in phase VI in China; High quality customers supporting motor iron core continue to benefit from the trend of automobile electrification; The natural gas injection system is bound to Bosch. In view of the decline in the short-term light truck market and the adjustment of profit forecast, it is expected that the company's revenue from 2021 to 2023 will be reduced from RMB 1.198/2.190/3.064 billion to RMB 9.59/20.19/2.949 billion, and EPS from RMB 0.61/1.28/1.95 to RMB 0.52/1.23/1.96, corresponding to the closing price of RMB 25.61/share on January 26, 2022, with PE 49 / 21 / 13 times respectively. In view of the high growth of the company's new energy business, 30 times PE valuation was given in 2022, and the target price was adjusted from 38.40 yuan to 36.90 yuan, maintaining the "buy" rating.
Risk tips
The market share of EGR products in phase VI in China is lower than expected; The sales volume of commercial vehicles in China is lower than expected; Global and medium Shanxi Guoxin Energy Corporation Limited(600617) automobile penetration is lower than expected; The expansion of new energy business was lower than expected.
