Changhong energy (836239)
Acquisition of minority equity of core subsidiary Changhong Sanjie, with the participation of controlling shareholders and employee stock ownership plans. Changsuo regularly highlights its confidence: on February 8, Changhong energy issued an announcement on the plan for acquisition, merger and additional issuance. The company plans to issue shares to buy 33.17% equity of Changhong Sanjie. At that time, Changhong Sanjie will become a wholly-owned subsidiary of the company; The company plans to issue shares to raise supporting funds to supplement the working capital of the listed company and the target company and the project construction of the target company. Changhong Sanjie is the main body of lithium battery business. The acquisition is conducive to business integration without recognizing goodwill. The issuing objects include the company’s controlling shareholders, employee stock ownership plans and various institutional investors. The issuing price is no less than 80% of the average price of the first 20 transactions, i.e. 94.84 yuan / share. The issuance plan is divided into two parts. One part is to issue shares to purchase minority equity of subsidiaries. The issuance method is lock price issuance with a lock-in period of 12 months; The other part is that the supporting raised funds are issued through competitive bidding, with the controlling shareholders of Changhong energy participating in 50%, and the employee stock ownership plan established by Changhong energy participating in no more than 60 million yuan. Among them, the lock-in period of institutional investors is 6 months, the lock-in period of relevant shareholders of Changhong energy is more than 12 months, and the employee stock ownership plan shall not be transferred within 36 months.
The cordless market of electric tools is broad, and lithium battery is an important part, accounting for 13% of the cost: electric tools are mainly divided into industrial level, professional level and general level. Among them, the industrial market accounts for about 32%, and the target customers are mainly professional factories or engineering construction teams; The professional market is the widest, accounting for about 40.5%, and the competition is the most intense. It emphasizes the adaptability to complex environment, stability, high power requirements, long service life of motor, long-time repeated operation, etc. it is mostly used in construction industry and pipeline industry, mainly including American Dewei, German Bosch, Japanese Makita and other brands. General grade is also called DIY grade, accounting for about 27.5%. It has the characteristics of low product price, high cost performance, portability and good combination. The main customers are ordinary families. The subdivided types of electric tools are also divided into five types: electric drill, electric grinder, electric saw, sander and impact wrench. Among them, the market share of electric drill in 2019 is the highest, up to 36.3%. Among the main parts of electric tools, the cost of structural parts accounts for the highest proportion, up to 25.4%, and the cost of power supply accounts for about 12.9%, mainly including batteries, power cords and chargers; Electric drive accounts for 11.9%, mainly including motor, etc.
Price advantage + strategic changes of Japanese and Korean manufacturers, China’s lithium battery market for electric tools is large: the global battery market demand for electric tools will reach 9.6gwh in 2020, the demand is expected to reach 19.3gwh in 2025, and the CAGR will reach 15.0% in 2020-2025. The global shipment of high rate lithium batteries for electric tools will reach 2.02 billion in 2020, 4.93 billion in 2025 and 19.3% CAGR. According to Gaogong lithium battery, the shipment of lithium batteries for electric tools in China will reach 5.6gwh in 2020, with a year-on-year increase of 124%. It is expected that the shipment will reach 15gwh in 2025 and 21.8% CAGR in 2020-2025. Chinese enterprises have price advantages over international manufacturers. The average cost of high-performance cylindrical batteries (1.3-3.0ah) is more than 40% lower than that of foreign manufacturers. At the same time, the lithium battery certification cycle is long, which requires strong technical strength, product competitiveness and supply scale. Taking TTI as an example, its supplier selection needs 230 audits for nearly two years. At present, Chinese manufacturers have entered the supply chain of international front-line customers such as TTI. Even if Japanese and Korean manufacturers return in the future, it is difficult to have significant advantages. At the same time, in the face of competition, Japanese and Korean enterprises adopt differentiated and high-end strategy. According to evtank, in 2020, Chinese enterprises’ high rate lithium batteries for electric tools were mainly concentrated at 1.5 and 2.0ah, accounting for 95% in total. Japanese and Korean enterprises are mainly 2.5ah, accounting for 62.0% in 2020 and 36.0% in 2.0ah. In the next step, they will gradually abandon 2.0ah products and move towards 21700 series products with 3.0ah and higher capacity. In terms of production expansion plan, Samsung SDI and LG also focus on power batteries for electric vehicles.
Chinese manufacturers have expanded their production. Changhong energy is expected to produce 500 million lithium batteries in 2022: at present, Eve Energy Co.Ltd(300014) , Tianpeng power supply, haisida and Changhong energy are deployed in the fields of electric tools, garden tools and smart home. According to the statistics of publicly disclosed data, it is estimated that the production capacity of Eve Energy Co.Ltd(300014) electric tool lithium batteries will be more than 800 million in 2022, Tianpeng power supply will reach about 1.3 billion, haisida is expected to reach about 570 million, and Changhong energy will reach about 500 million. Eve Energy Co.Ltd(300014) at present, the scale is the highest. The revenue in the first three quarters of 2021 reached 11.448 billion yuan, an increase of 114% at the same time. The main business includes lithium primary battery, lithium-ion battery, lithium battery power system and other fields, of which lithium-ion battery is used in consumer electronics, power battery and electric tool industry. Tianpeng power is a 100% holding subsidiary of Jiangsu Azure Corporation(002245) . In the first three quarters of 2021, Jiangsu Azure Corporation(002245) achieved a revenue of 4.748 billion yuan, a year-on-year increase of 68.79%. At present, it mainly involves three major businesses in the field of lithium battery, led and metal logistics, of which H1 lithium battery business accounted for 38.88% in 2021. Changhong energy acquired Changhong Sanjie in 2018 and entered the field of lithium battery. At present, its main business consists of alkali battery, carbon battery and lithium battery. In 2021, H1 alkali battery revenue accounted for 42.11% and lithium battery revenue accounted for 55.42%; In the first three quarters of 2021, the revenue reached 2.225 billion yuan, a year-on-year increase of 69.7%; The net profit attributable to the parent company was 203 million yuan, a year-on-year increase of 71.0%.
Investment suggestion: Buy-A investment rating, 6-month target price 138.37 yuan. We expect that the company’s revenue from 2021 to 2023 will be RMB 2.953/4.509/5.382 billion respectively, with a year-on-year growth rate of 51.3% / 52.7% / 19.4% respectively, and the net profit attributable to the parent company will be RMB 250/3.98/461 million respectively (without considering the impact of the completion of the acquisition), with a year-on-year growth rate of 54.1% / 59.6% / 15.8%; Given the investment rating of Buy-A, the company’s corresponding reasonable value is RMB 11.247 billion and the corresponding target price is RMB 138.37, which is equivalent to the dynamic P / E ratio of 28.24x in 2022.
Risk tips: risks related to M & A and issuance, risks that downstream demand is lower than expected, risks that the company’s production expansion progress is not as expected, risks of industrial policies, risks of raw material supply and price fluctuations, and risks of high customer concentration
