\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 80 Wuxi Longsheng Technology Co.Ltd(300680) )
Wuxi Longsheng Technology Co.Ltd(300680) is the leader in China's EGR industry. The expansion of new energy vehicle drive motor core business is expected to open the second growth curve Wuxi Longsheng Technology Co.Ltd(300680) was established in 2004. Its main business is the production and sales of automobile EGR system. It is the leader of EGR industry in China. The company was listed on July 25, 2017. In 2018, it acquired micro research precision and arranged the upstream precision parts of EGR system. In September 2020, it raised a fixed increase of 230 million yuan for the new energy vehicle drive motor iron core and natural gas injection gas rail assembly project. In November 2021, the company announced that it planned to raise an additional 716 million yuan for the expansion of motor iron core of new energy vehicles. In recent years, the company's performance has continued to grow, and the operating revenue has increased from 150 million yuan in 2017 to 618 million yuan in the first three quarters of 2021; The net profit attributable to the parent company increased from 18 million yuan in 2017 to 71 million yuan in the first three quarters of 2021, while the period expense rate decreased from 19.41% in 2018 to 8.44% in the first three quarters of 2021.
Evtank predicts that the CAGR of new energy vehicle drive motor market will reach 38% from 2021 to 2025. The company will increase the production of motor iron core in two rounds, which is expected to usher in the release of performance. Motor iron core is the core component of the driving motor of new energy vehicles, accounting for 30% of the value of the motor. Evtank predicts that the Shanxi Guoxin Energy Corporation Limited(600617) automobile drive motor market is expected to grow from 7.464 billion yuan in 2020 to 37.903 billion yuan in 2025, with CAGR reaching 38%. In 2020, after the motor iron core project funded by the company is completed, it is expected to add about 1.2 million sets of annual production capacity; At the end of 2021, the company plans to raise funds to expand 10 motor iron core production lines; In February 2022, the company obtained the exclusive license for adhesive technology of drive motor iron core from Japan Kuroda Seiko Co., Ltd., which played a positive role in the subsequent capacity expansion. After the completion of two rounds of production expansion of motor iron core, the company is expected to usher in the release of performance.
The EGR market space under the national six standard reached 4.17 billion yuan, nearly seven times larger than that before the implementation of national six, and the company's market share reached 38%, ranking first in China. After the implementation of the national six standards, medium and heavy-duty diesel vehicles will change from non EGR route to EGR route. Among them, 100% of natural gas heavy trucks will be equipped with EGR system, about 80% of diesel heavy trucks will be equipped with EGR system, and the EGR penetration rate of light diesel vehicles will be further improved. Under the condition that the automobile sales volume remains stable, we calculate that the EGR market space is expected to reach 4.17 billion yuan after the implementation of the sixth national plan, which is nearly seven times larger than that before the implementation of the sixth national plan. As a leader in the industry, the company accounted for 38% of the market in China in 2020, ranking the first in the list, and the national six stage technology reserve has been fully completed, which is expected to further improve the market share.
Micro research precision has successfully completed its three-year performance commitment, and the R & D of motor iron core reflects the synergy with the company's business. Micro research precision was originally funded by a Japanese funded precision mold enterprise. It is mainly engaged in automotive precision parts. It belongs to the upstream and downstream of the same industry as the company's business. It was wholly acquired by the company in 2018 and successfully completed its three-year performance commitment. In recent years, it has maintained a net profit growth rate of more than 30%. Micro research precision began to develop the motor iron core of new energy vehicles in 2017. After the acquisition, the company successfully put the motor iron core production line into operation by using its R & D technology to achieve synergy. The motor iron core project has also injected new growth power into the company.
Investment suggestion: the company's EGR products occupy the first place in China with a market share of 38%. Compared with the national five standards, the industry market space under the national six standards may be expanded seven times to reach 4.17 billion yuan. As an industry leader, the company is expected to benefit. The new energy vehicles downstream of the motor core continued to enjoy a high boom, with sales of 3.52 million vehicles in 2021, a year-on-year increase of 158%. According to the prediction of China Automobile Association, the sales volume in 2022 will reach 5 million vehicles. The company plans to build 15 motor iron core production lines through two fixed increase fund-raising, and is expected to add 3.7 million sets of annual production capacity after completion. The downstream of the company has been bound with customers such as liandian, Weilai, Byd Company Limited(002594) , Volkswagen and a foreign-funded enterprise, and the motor core sector is expected to usher in the accelerated release of performance. Based on the principle of prudence, without considering the impact of the announcement of fixed increase in 2021 on the company's performance, we expect the company's operating revenue to be 1.012/17.66/2.527 billion yuan from 2021 to 2023, with a year-on-year growth rate of 75% / 75% / 43% respectively, and the net profit attributable to the parent company to be 107 / 203 / 294 million yuan, with a year-on-year growth rate of 100% / 90% / 45% respectively. According to the closing price on March 30, the dynamic PE from 2021 to 2023 is 43 / 22 / 16 respectively, maintaining the buy rating.
Risk tip: the growth rate of new energy vehicles is lower than expected; The production capacity is lower than expected; The implementation of the sixth national policy is not as expected; Risk of technical route switching; Intensified market competition; Uncertain impact on the implementation progress of fixed increase.
