\u3000\u3000 Luxshare Precision Industry Co.Ltd(002475) (002475)
The company issued an announcement on signing the strategic cooperation framework agreement: on February 11, Luxshare Precision Industry Co.Ltd(002475) announced that it had jointly established a joint venture with Chery new energy to engage in the R & D and manufacturing of new energy vehicles. Luxshare Precision Industry Co.Ltd(002475) the controlling shareholder, Lixun Co., Ltd., purchased 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.
The short-term performance is under pressure, and the medium and long-term logic is clear: as an EMS manufacturer of major consumer electronics customers, the company’s ability to provide integrated services has been continuously enhanced. In 2021, the disturbance of rising prices of raw materials, lack of cores and delayed production of new products from key customers will gradually weaken. With the extension of the company in the fields of watches, mobile phones and automobiles, the performance has high growth momentum. We are optimistic about the performance repair of the company in the short and medium term and the long-term growth space opened by cooperation with Chery.
Create a global precedent for vehicle ODM: 1) under the general trend of electric and intelligent vehicles, brands may have more demand for vehicle ODM. The penetration of ODM model in consumer electronics may reappear in the automotive industry. According to counterpoint data, the proportion of smart phones manufactured in ODM / IDH mode in global smart phone shipments has increased from 25% in 2016 to 36% in 2020, and the penetration rate is expected to reach 40% in 2025. 2) In order to be the main engine factory of electric vehicles, consumer electronics manufacturers prefer to integrate the existing EMS resources and select capable and resourced suppliers among the EMS suppliers with long-term cooperation as their automobile Tier1 suppliers. Luxshare Precision Industry Co.Ltd(002475) has a long-term cooperative relationship with major consumer electronics customers, and has excellent financial resources and ability. 3) Chery’s management and the company have the same concept and consensus on the development trend of the automobile industry. For the ODM car manufacturing business model that may be developed in the future, the two sides will have a lot of cooperation. 4) Chery is good at vehicle business, and the joint venture will be led by Chery. Luxshare Precision Industry Co.Ltd(002475) in cooperation, it does not build cars, but cooperates with Chery new energy to develop ODM business of manufacturing complete vehicles externally.
Chery has developed rapidly and helped the company enter the market. (Tier 1:1) Chery has mature production capacity. Chery sold 845000 passenger cars in 2021, a year-on-year increase of 40.97%. Chery continued its growth momentum in 2022, with 107710 terminals sold in January, a year-on-year increase of 20%, a record high in the same period. In February 2021, Chery Qingdao Passenger car project plans to invest 13 billion yuan, which can meet the annual production capacity of 300000 complete vehicles. 2) Chery has a complete R & D system. Chery Automobile Co., Ltd. ranked first in the “top 100 list of invention patents in Anhui Province in 2021”, ranking first in the top 100 for eight consecutive years. Chery group has an independent platform in vehicle manufacturing, which can provide Chery and other brands with comprehensive services from vehicle development to mass production, and has a strong and leading core competitive advantage in the industry. 3) Chery is one of the few partners in China suitable for ODM car manufacturing business model. Luxshare Precision Industry Co.Ltd(002475) the cost of cooperation with Chery is relatively low, but it has higher and faster potential benefits. This strategic cooperation will rapidly develop Luxshare Precision Industry Co.Ltd(002475) Tier1 business on the basis of building the ODM model of cooperative car manufacturing, realize dynamic entry and quickly improve the company’s core competitiveness as a Tier1 manufacturer.
The company’s automobile business has profound accumulation: 1) the traditional automobile Tier1 manufacturer has the production capacity of key auto parts. Taking Delphi as an example, the core component of the fuel vehicle is the engine. Delphi can supply most of the core components required by the engine. Taking the technical source of the industrial chain as the fulcrum, Delphi has become a Tier1 supplier with the right to speak. The core components of new energy vehicles are batteries, electronic controls and electric drives. Companies that establish core barriers in these three fields will have more opportunities to become Tier1 suppliers of new energy vehicles. 2) The company has accumulated in the automotive field for more than ten years. Its main products include connectors / connecting wires, low / high voltage vehicle harnesses, special harnesses, etc. its main customers include Chinese traditional car enterprises, new forces in car manufacturing and some large Tier1 manufacturers. 3) BCS acquired by the controlling shareholder of the company, Hong Kong Lixun, is a primary supplier of vehicle manufacturers, and its customers basically cover vehicle manufacturers of global well-known brands. The main products of BCS include automotive switch system, integrated electronic control panel, steering shaft control system, access system, sensors, etc., all of which belong to the field of automotive application systems. After the acquisition, BCS has expanded its business of intelligent cockpit, intelligent driving, power module, Internet of vehicles and other businesses, with customers at home and abroad, including customers of Volkswagen, GM, Tesla, BBA and Japan.
Investment suggestion: it is estimated that the operating revenue of the company from 2021 to 2023 will be RMB 1300.21/169333/212.008 billion respectively, with a year-on-year increase of 40.56% / 30.24% / 25.20%, and the net profit attributable to the parent company will be RMB 70.49/104.66/15.28 billion respectively, with a year-on-year increase of – 2.44% / 48.47% / 46.01%. At present (February 16, 2022), it corresponds to pe44.00% 20x / 29.77x/20.39x, covering the “buy” rating for the first time.
Risk tips: the risk of rising prices of raw materials, the risk that the production of key customers is less than expected, and the risk of intensified industry competition.
