\u3000\u3 Shengda Resources Co.Ltd(000603) 786 Keboda Technology Co.Ltd(603786) )
Event overview
The company released the 2021 annual report and the first quarterly report of 2022: the revenue in 2021 was 2.81 billion yuan, a year-on-year increase of – 3.7%; The net profit attributable to the parent company was 390 million yuan, a year-on-year increase of – 24.4%; Deduction of net profit not attributable to parent company was 340 million yuan, a year-on-year increase of – 26.7%. Among them, 2021q4 achieved a revenue of 760 million yuan, a year-on-year increase of – 18.3% and a month on month increase of 29.9%; The net profit attributable to the parent company was 120 million yuan, with a year-on-year increase of – 39.8% and a month on month increase of 180.5%; Net profit deducted from non parent company was RMB 100 million, with a year-on-year increase of – 45.6% and a month on month increase of 226.8%. In 2022q1, the revenue was 740 million yuan, a year-on-year increase of – 2.8%, a month on month increase of – 3.4%, and the net profit attributable to the parent company was 90 million yuan, a year-on-year increase of – 24.7%, a month on month increase of – 21.5%.
Analysis and judgment:
Volkswagen’s weak production led to a decline in revenue
In 2021, the company’s revenue reached 2.81 billion yuan, with a year-on-year increase of – 3.7%, including domestic sales of – 9.9% and export sales of + 7.9%. We judge that the decline in revenue is mainly affected by the lack of core of Volkswagen China. In 2021, the output of FAW Volkswagen and SAIC Volkswagen decreased by 18.2% and 16.7% respectively. Weak demand led to the pressure on the company’s revenue. In the split quarter, the revenue of 2021q4 was 760 million yuan, with a year-on-year increase of – 18.3% and a month on month increase of 29.9%. Driven by the increase of demand at the end of the year, it has improved month on month.
By product:
1) lighting control: the company’s revenue of lighting control system in 2021 was 1.38 billion yuan, with a year-on-year increase of – 4.6%, of which the sales volume / unit price were 21.87 million pieces / 63.1 yuan respectively, with a year-on-year increase of + 21.6% / – 15.0%. The increase in sales mainly benefited from the mass production of atmosphere lamp controller. The sales volume of Ford’s climbing light control platform and BMW’s climbing light control platform are expected to increase in 2021 and 2022;
2) motor control system: in 2021, the revenue of motor control system was 610 million yuan, with a year-on-year increase of + 10.8%. The corresponding sales volume / unit price were 5.79 million pieces / 104.5 yuan respectively, with a year-on-year increase of + 0.8% / + 9.9%. The revenue growth was mainly driven by the sales growth of high single vehicle value products such as national VI emission system of commercial vehicles and AGS.
3) on board electronics and electrical appliances: in 2021, the revenue of on-board electronics and electrical appliances was 530 million yuan, a year-on-year increase of – 19.1%, and the corresponding sales volume / unit price were 24.16 million pieces / 21.7 yuan, a year-on-year increase of – 17.3% / – 2.2%, which was mainly caused by the decline in the sales of traditional electronic and electrical products supporting Volkswagen.
In 2022q1, the revenue reached 740 million yuan, with a year-on-year increase of – 2.8% and a month on month increase of – 3.4%. We judged that the main reason was that FAW Volkswagen stopped production from March 13 to April 11, resulting in a year-on-year decrease of 45.9% in FAW Volkswagen output in March. It is expected that with the full resumption of work and production of FAW Group, the demand will pick up and the mass production climbing of new projects will be superimposed, and the revenue is expected to resume the growth trend.
Gross profit margin is under short-term pressure, and R & D investment is increased
The gross profit margin of the company in 2021 was 34.6%, with a year-on-year increase of -1.8pct, mainly due to the decline of 3.7pct in the gross profit margin of lighting control system due to the rise in the price of chips and raw materials, as well as the decline of 3.3pct in the gross profit margin due to the decline in the output of on-board electronics and appliances and the decline in capacity utilization; Quarterly, the gross profit margin of 2021q4 was 33.8%, with a month on month increase of + 0.9pct; The net profit attributable to the parent company was 120 million yuan, a month on month increase of + 180.5%.
In 2022q1, the net profit attributable to the parent company was RMB 90 million, with a year-on-year increase of – 24.7% and a month-on-month increase of – 21.5%. It is mainly affected by the price rise of raw materials. It is expected that with the improvement of disturbing factors such as lack of core and the operation of the price adjustment mechanism of vehicle enterprises, it is expected to transfer the impact of the rise in the cost of chips and raw materials to the main engine plant through subsidies and reducing the annual decline in the future, so as to have great flexibility in profit restoration.
In terms of expenses, the rates of sales, management, R & D and finance in 2021 were 2.2%, 5.8%, 10.8% and 0.4% respectively, with a year-on-year increase of -0.6pct, 0.8pct, 2.5pct and 0.8pct respectively; In 2022q1, the rates of sales, management, R & D and finance are 1.9%, 4.9%, 11.3% and – 0.3% respectively. The cost control is getting better, and the R & D expenses continue to rise due to the development of new projects and the layout of forward-looking technologies.
Significant new business increment and continuous optimization of customer structure
Product +: the business lines of the company cover automotive lighting control system, motor control system, energy management system, on-board electrical appliances and electronics, etc. the product matrix includes various light source controllers, atmosphere lamp controllers, small and medium-sized motor control systems, electromechanical integration, on-board electronic appliances, etc. In 2021, in terms of automotive lighting control system of advantageous business, BMW tail lamp controller, Ford headlamp controller, Renault headlamp controller and other important projects under research will be transferred to mass production one after another; At the same time, the company made great efforts to develop emerging businesses. New businesses such as AGS, in cabin intelligent light source, USB and national VI emission system of commercial vehicles sold a total of 415million yuan, a year-on-year increase of +36.5%, and the product structure continued to be optimized. In terms of new projects, 22 fixed-point projects were obtained in 2021, with a year-on-year increase of about 50%. By the end of 2021, there are 129 projects under research, and the sales volume in the whole life cycle is expected to be 171.93 million. In the future, as the production capacity of light control, AGS, USB and other products climbs, as well as the hydrocarbon injection system and SCR nozzle of national VI products are successively put on the market, it is expected to drive the performance growth of the company.
Customers +: 1) enter the Toyota system, pointing to the top ten car companies in the world. The company is one of the few Chinese local suppliers to enter the supporting system of international top vehicle manufacturers and develop automotive electronic components. In recent years, the company has further promoted the global market strategy, successively entered the supply chain system of Mercedes Benz, BMW, GM, Ford, Renault and other automobile enterprises, and successfully obtained the fixed point of GAC Toyota products in 2021, laying a good foundation for the company to further enter Toyota’s global platform and further improve its product market share. 2) Vigorously explore new energy customers and grasp the trend of electric intelligence. In 2021, the company’s new energy business entered a period of rapid growth, with a sales revenue of 158 million yuan, a year-on-year increase of 135.82%. The cooperation with Byd Company Limited(002594) , Geely, Xiaopeng and other new energy customers has been deepened, and the maximum single vehicle sales has exceeded 1300 yuan / vehicle. It is expected to continue to benefit from the penetration of new energy vehicles in the future.
Achieve breakthroughs in highly difficult domain control and open medium and long-term growth space
In 2020, the company’s DCC supporting Xiaopeng has achieved batch shipment. In 2021, based on the profound technical accumulation in the field of drive execution control, the company achieved an important breakthrough in the field of domain control, and successfully obtained the fixed point of body domain control of a new energy vehicle enterprise, Byd Company Limited(002594) chassis domain controller, as well as the mainstream independent / new brands DCC (adaptive suspension controller) such as Xiaopeng, Byd Company Limited(002594) , ideal and Geely ASC (air suspension controller) product fixed point. In the future, the upgrading of electronic and electrical architecture and the accelerated penetration of electric intelligence will usher in a demand explosion for chassis domain control. It is estimated that the global market scale will be 26.1 billion yuan in 2025. The company is expected to continue to go deep into the field of domain control and build another moat in the medium and long term.
Issue equity incentive and bind core employees
The company recently issued a restricted stock incentive plan: involving a total of 463 objects (including executives, middle-level managers, technical backbone and business backbone personnel of the company (including subsidiaries). It is proposed to grant 4 million restricted shares to the incentive objects, accounting for about 1.0% of the total share capital of 400.1 million shares at the time of the company’s announcement. It is granted at one time without reserved rights and interests, and the grant price is 24.6 yuan / share.
The specific assessment conditions set in this equity incentive strategy are as follows: 1) the weight of revenue index is 80%, the growth rate of the company’s revenue from 2022 to 2024 shall not be less than 15% / 32% / 52%, and the corresponding revenue is RMB 3.23/42.6/6.48 billion respectively; 2) The weight of the net profit index is 20%. The year-on-year growth rate of the company’s net profit from 2022 to 2024 shall not be 10% / 21% / 33%, and the corresponding net profit shall be RMB 470 / 570 / 760 million respectively. The company continues to improve its management ability, promote substantial business improvement and create value for shareholders by improving the incentive mechanism. We expect that with the gradual easing of core shortage and the ramp up of mass production of new products such as intelligent light control, AGS and USB, and the strong new product cycle, the company is expected to benefit from the intelligent electric upgrading trend, exceed the assessment objectives of sales volume and net profit, and the market competitiveness and long-term growth ability are expected to be improved.
Investment advice
As a leading enterprise of automobile controller in China, the company’s product and customer structure continues to rise, and is expected to benefit from the trend of Electric Intelligence for a long time in the future. In view of the impact of short-term industry core shortage, adjust the profit forecast: it is expected that the company’s revenue in 20222023 will be adjusted from RMB 3.94/5.23 billion to RMB 3.37/4.31 billion, the net profit attributable to the parent company will be adjusted from RMB 610 / 820 million to RMB 510 / 680 million, EPS will be adjusted from RMB 1.52/2.04 to RMB 1.28/1.70, the new revenue and net profit attributable to the parent company in 2024 will be RMB 5.69 billion and RMB 910 million respectively, EPS will be RMB 2.26, corresponding to the closing price of RMB 42.24 on April 21, 2022, and PE will be 33 / 25 / 19 times. In view of the good trend of the expansion of the company’s product range and the upward customer structure, as well as the judgment of the gradual recovery of the prosperity of the automobile market, the “overweight” rating is maintained.
Risk tips
Industry competition intensifies; Customer expansion is less than expected; The volume of new products is less than expected; Chip shortage; Rising raw material costs, etc.
