\u3000\u3000 Luxshare Precision Industry Co.Ltd(002475) (002475)
Event: on February 11, the company signed the strategic cooperation framework agreement with Chery group in Wuhu. It plans to establish a joint venture with Chery new energy to specialize in the R & D and manufacturing of new energy vehicles, and provide cutting-edge R & D and design, mass production platform and access to the sea for the company’s auto core parts business, Committed to achieving the company’s medium and long-term goal of becoming a leading manufacturer of automotive parts Tier1. In addition, the controlling shareholder of the company, Lixun Co., Ltd. signed the equity transfer framework agreement with Qingdao Wudaokou, agreeing to purchase 19.88% equity of Chery holdings, 7.87% equity of Chery shares and 6.24% equity of Chery new energy held by Qingdao Wudaokou with RMB 10.054 billion.
From consumer electronics to automotive electronics, platform precision manufacturing leaders create the second growth curve:
The company is a leading consumer electronics platform in China, and continues to expand its business territory around key customers. Vertically, the company has realized the integrated layout of components + modules + system assembly; Horizontally, the parts / modules are expanded from connectors to acoustics, antennas, wireless charging, motors, etc., and the whole machine is expanded from airpods to applewatch, iPhone, etc. Based on the basic market of consumer electronics, the company also actively distributes the fields of communication, automobile, medical treatment and so on. In the automotive field, the company focuses on the automotive electrical and intelligent network connection of the vehicle “blood vessel and nervous system”. Its products include vehicle harness, special harness, high-voltage harness and connector of new energy vehicle, high-speed connector, intelligent electrical box, RSU (roadside unit), TCU (vehicle communication unit) and CGW (central gateway). At present, the company has been a number of automotive Tier1 suppliers, and has accumulated rich application cases and customer recognition. In 2020 / 2021h1, the company’s automotive interconnection products and precision components business achieved revenue of 2.844 billion yuan / 1.774 billion yuan respectively, with a year-on-year increase of 20.44% / 38.99% and gross profit margin of 16.52% / 16.48% respectively. The company is expected to continue to expand more customers and become a leading auto parts platform enterprise.
The sales volume of new energy vehicles continued to improve, and the trend of vehicle electrical intelligence was clear: according to cleantechnica data, the global sales volume of new energy vehicles in 2021 was nearly 6.5 million, a year-on-year increase of 108%, reaching a new high since 2012. Among them, the sales volume of Shanxi Guoxin Energy Corporation Limited(600617) vehicles was 2.94 million, accounting for 45%. The electrification and intellectualization of vehicles have driven a substantial increase in the demand for automotive electronics. According to the data of Gasch Automotive Research Institute, the cost of automotive electronics in pure electric / hybrid vehicles accounts for 65% / 47%. The company’s automotive interconnection products and precision components business mainly includes harness, connector, connecting wire, etc., all of which have a broad market space. According to the prediction of markets and markets, the scale of the global automotive harness market will increase from US $47 billion in 2021 to US $57.4 billion in 2026, with a CAGR of 4.1%; According to imarcgroup’s prediction, the global automotive connector market will grow from US $12.1 billion in 2021 to US $16.7 billion in 2027, with a CAGR of 5.94%; Industriarc predicts that the global automobile connecting line market will exceed US $65 billion in 2026, and the CAGR will reach 6.9% from 2021 to 2026. With the leading precision manufacturing platform and good customer channels, the penetration rate of automotive products is expected to continue to increase rapidly.
The company and Chery have two-way empowerment, and the new energy vehicle manufacturing business can be expected in the future: the company and Chery group plan to establish a cooperative subsidiary to specialize in the vehicle R & D and manufacturing of new energy vehicles. The equity structure of the joint venture is proposed to adopt the scheme that the company subscribed 500 million yuan to hold 30% of the registered capital and Chery new energy subscribed 1.167 billion yuan to hold 70% of the registered capital. According to the official data of Chery, the annual car sales of Chery group exceeded 960000 in 2021, with a year-on-year increase of 31.7%; The sales volume of new energy vehicles reached 109000, a year-on-year increase of 144.6%. In January 2022, Chery group actually sold 108000 terminals, with a year-on-year increase of 20%, a record high in the same period; The sales volume of new energy vehicles reached 21000, a year-on-year increase of 179.6%. The establishment of the joint venture is a two-way empowerment for Lixun and Chery. On the one hand, the layout of Lixun in automobile harness, connector, connecting wire, RSU, TCU, CGW and other categories is relatively perfect, which improves the support capacity of some supply chains of Chery; On the other hand, the joint venture will provide cutting-edge R & D and manufacturing platforms and access to the sea for the auto parts and module products of Lixun. At the same time, Lixun will officially enter the field of vehicle OEM of new energy vehicles, which is expected to grow into a leading enterprise of automotive electronic platform and further thicken the medium and long-term performance.
Investment suggestion: we estimate that the company’s revenue from 2021 to 2023 will be 123.443 billion yuan, 154.143 billion yuan and 189.457 billion yuan respectively, the net profit attributable to the parent company will be 8.033 billion yuan, 11.025 billion yuan and 14.262 billion yuan respectively, and the EPS will be 1.14 yuan, 1.56 yuan and 2.02 yuan respectively, giving the “Buy-A” investment rating.
Risk warning: the sales volume of key customers is lower than expected; New business expansion is less than expected; Intensified market competition, etc.
