Zhejiang Hangke Technology Incorporated Company(688006) (688006)
The company plans to raise 2.31 billion yuan through non-public offering. The company announced the non-public offering plan and plans to raise funds from no more than (including) 35 specific objects. It is estimated that the total amount of funds raised will not exceed 2.31 billion yuan. After deducting the issuance expenses, it will be used for the intelligent manufacturing construction project of lithium-ion battery charging and discharging equipment (1.33 billion yuan), the technological transformation project of production intelligence and information improvement (300 million yuan), the overseas business network layout and basic R & D Assembly manufacturing center construction project (RMB 250 million) and supplementary working capital (RMB 420 million). According to the company’s calculation, the impact of this issuance on the company’s basic earnings per share in 2022 is about 3.3%.
Raised investment projects promote the company to expand production capacity, reduce cost and increase efficiency. The lithium ion battery charging and discharging equipment intelligent manufacturing construction project can expand the capacity of the company’s lithium battery post-treatment equipment and realize the automation and intelligence of the company’s processing and manufacturing links. According to the information disclosed in the company’s plan for issuing A-Shares to specific objects in 2021, the after tax investment payback period of the project is expected to be 7 years (including 3 years of construction period). The technological transformation project of production intelligence and informatization is conducive to the efficient integration of the company’s business, continuously improve its product quality and enhance its core competitiveness. Overseas business network layout and basic R & D, assembly and manufacturing center construction projects promote the company to carry out overseas business layout in advance, respond to the release of the global lithium battery market, shorten service response time and enhance stickiness with overseas customers.
The third quarterly report confirms the inflection point of the company’s operation, and the order structure is expected to continue to improve. In the first three quarters of 2021, the company achieved a revenue of 1.76 billion yuan, a year-on-year increase of 71.0%, and a net profit attributable to the parent company of 240 million yuan, a year-on-year decrease of 22.6%. Affected by order structure, equity incentive, exchange loss and other factors, the company’s revenue has increased this year, but its profit has decreased year-on-year. In the first three quarters of 2021, the company’s gross profit margin and net profit margin were 30.1% and 13.5% respectively, with a sharp decline year-on-year. However, the gross profit margin and net profit margin in Q3 were 32.8% and 16.2% respectively, up 9.0pcts and 6.5pcts month on month compared with Q2, indicating that the turning point of the company’s profitability may have arrived. Looking forward to the future, we believe that the gross profit margin may continue to rise, and the profit side elasticity is greater than the income side elasticity.
With the deepening of electrification trend and the iteration of power battery technology, the company’s competitive advantage is consolidated. The company is the global leader in lithium battery back-end equipment and will continue to benefit in the future: 1) customers cover mainstream battery plants at home and abroad, among which LG new energy / ski plans to have a production capacity of 430gwh / 200gwh in 2025, and LG new energy / Ski / Samsung SDI has made progress in fund-raising and production expansion, and it is expected that the speed of production expansion will be accelerated; 2) The products are comprehensive and technologically advanced, which can cover a full set of solutions for square / cylindrical / soft package and post-treatment processes, and the technologies such as heating, pressurizing, charging and discharging and series charging and discharging are advanced. From the perspective of technical iteration, the potential technical changes affecting the rear section equipment of lithium battery include 4680 large cylinders, series charge and discharge, semi-solid / solid-state batteries, etc. the company has corresponding products and technologies to meet the market demand. We believe that Zhejiang Hangke Technology Incorporated Company(688006) has in-depth cooperation with mainstream battery manufacturers at home and abroad, and the customer stickiness of lithium battery rear section equipment is strong, which will enable the company to benefit from the process of technology iteration in the whole industry.
Investment advice
We maintain the company’s profit forecast unchanged. It is expected that the company will achieve revenue of RMB 2.32/39.1/5.42 billion and net profit of RMB 420/8.6/1.32 billion from 2021 to 2023.
The capacity cycle of battery plants outside China is misplaced. In the future, overseas customers are expected to accelerate the expansion of production, laying the foundation for sustained and rapid growth of revenue. The increase in the proportion of overseas customers may further boost the gross profit margin. In conclusion, we believe that Zhejiang Hangke Technology Incorporated Company(688006) should enjoy a certain valuation premium compared with other lithium battery equipment companies. At present (December 30, 2021), the corresponding P / E ratios from 2021 to 2023 are 102.1x/49.7x/32.4x respectively, maintaining the “buy” rating.
Risk statement
Product and technology iterations are less than expected, downstream customer expansion is less than expected, capacity expansion is less than expected, and non-public offering is less than expected.
