\u3000\u3 Shengda Resources Co.Ltd(000603) 348 Wencan Group Co.Ltd(603348) )
Event overview
The company released the first quarterly report of 2022: in 2022q1, the revenue was 1.24 billion yuan, an increase of 18.4% year-on-year and 8.4% month on month; The net profit attributable to the parent company was RMB 80 million, with a year-on-year increase of 58.3% and a month on month increase of 180.6%; Net profit deducted from non parent company was RMB 80 million, with a year-on-year increase of 58.2% and a month on month increase of 246.2%.
Analysis and judgment:
Performance exceeds expectations, new energy drives high growth
The company achieved a revenue of 1.24 billion yuan in 2022q1, with a year-on-year increase of + 18.4% and a month on month increase of + 8.4%. We judged that the same month on month growth mainly benefited from the incremental contribution of new energy customers such as Weilai and the gradual easing of core shortage, driving the recovery of customer output. The net profit attributable to the parent company in 2022q1 reached RMB 80 million, with a year-on-year increase of + 58.3% and a month on month increase of + 180.6%. The growth rate was significantly higher than that of the revenue end, mainly due to the decline of the expense rate, and the overall performance exceeded the market expectation. From 2016 to 2019, the company was in the period of capacity expansion, actively transforming and arranging new energy products such as body structural parts and three electric system shells. At the same time, the company acquired French Bailian and completed the consolidation in 2019. With the gradual mass production of orders in hand and the steady progress of integration, the company’s performance began to turn upward from 2019q2. However, the epidemic in 2020 and the lack of core in 2021 put pressure on the company’s performance again. We judge that the company’s operation will return to the upward channel from 2022, New energy customers drive high performance growth in large quantities.
Gross profit margin rebounded month on month, and expenses decreased significantly
The gross profit margin of the company in 2022q1 reached 19.4%, with a year-on-year ratio of -1.6pct and a month on month ratio of + 0.6pct. We judge that the year-on-year decline is mainly affected by the upward trend of aluminum price, while the continuous recovery reflects the operation of the quarterly price adjustment mechanism. The company and the main engine factory adopt the cost plus pricing mode. The price rise of raw materials will not be affected by prolonging the cycle. However, due to the lag of price adjustment (or compensation) with the main engine factory, the quarterly profit margin fluctuates. We judge that the overall impact of raw materials this year is expected to be less than that in 2021.
In terms of expenses, the sales expense rate, management expense rate, R & D expense rate and financial expense rate in 2022q1 were 0.9%, 5.1%, 2.7% and 1.7% respectively, with a year-on-year decrease of -0.3pct, -2.1pct, -0.3pct and -0.3pct respectively, and a month-on-month decrease of -0.3pct, -0.4pct, 0.0pct and -0.3pct. The expenses decreased significantly, mainly due to the superposition of scale effect and the reduction of M & a related expenses. The integration effect has gradually appeared. The net interest rate in 2022q1 reached 6.4%, with a year-on-year increase of + 1.6pct and a month on month increase of + 3.9pct. The improvement is very obvious. It is expected to further improve the quality and efficiency in the future.
There are abundant orders for the re purchase of large die casting machines
The company plans to purchase another 9 large die-casting machines, and the first batch of 9000t integrated bottom sectors are successfully offline. According to the latest procurement plan in 2022, the company will have a total of 13 large-scale die-casting equipment, including 2 6000t + 2 9000t + 9 potential large-scale die-casting machines. We believe that the company actively purchases large-scale die-casting machines, the speed of production expansion continues to accelerate, showing abundant orders for integrated structural components and body structural parts. At the same time, the first set of 9000t super large die-casting island in the world was successfully put into trial production in xiongbang, Tianjin on the 18th. The first batch of 9000t large-scale integrated bottom sector die-casting auto parts were successfully offline, and the product performance met the requirements of customers and reached the international leading level. We believe that the company has signed a strategic cooperation agreement with Lijin group to jointly promote the development of super large integrated casting products, and has a great leading advantage in equipment. With the gradual mass production of orders in hand, with many years of body parts manufacturing experience (the income of body structural parts in 2021 was 650 million yuan, year-on-year + 84%), it is expected to quickly improve the yield, realize benefit, accelerate the expansion of the market and occupy a certain share first.
We judge that most main engine manufacturers will not adopt Tesla‘s self-made mode, mainly because of the large investment required for self production, including investment and construction of plants, purchase of machines, recruitment of personnel, etc., and the limited source of orders will lead to the scale effect not as good as the parts enterprises as third-party supporting suppliers. Compared with potential competitors in the same industry, we believe that the company’s forward-looking layout is not only equipment, but also years of precipitation in material and process research and development and rich process management experience (manifested in high yield), which is expected to rise as a lightweight leader under the general trend of integration.
Actively embrace the future lightweight leader of new forces
Actively embrace new forces and drive high performance growth. The company is the core supplier of Weilai body structural parts, supporting all models. We estimate that the supporting value of single vehicle is more than 3000 yuan. Among them, Weilai et7 has been delivered in March and et5 is expected to be delivered in September, which is likely to become a popular model. In addition, the company also supports Tesla, Byd Company Limited(002594) , Xiaopeng, ideal and other leading new energy vehicle enterprises, which is expected to drive high performance growth.
Acquire Bailian and enter the world. In 2019, the company acquired 61.96% of the equity of France Bailian Group for about 140 million euros, and will launch a compulsory tender offer for the remaining equity at the price of 38.18 euros per share. The company and Bailian Group have synergy in production process, product line and customers. With the help of Bailian Group’s local production and research capabilities in Europe, Asia and North America, the global layout is expected to accelerate, which is conducive to the company to obtain more overseas orders.
Investment advice
The company is a pioneer in integrated die casting and is expected to rise in the transformation of electric intelligence and become a leader in lightweight. Considering that the company actively embraces the leading new energy vehicle enterprises and accelerates the globalization of the acquisition of Bailian, the gradual mass production of orders in hand will drive the high growth of performance. Considering the impact of the rise in the price of raw materials and the lack of core, the company maintains the profit forecast: the company’s revenue in 22-24 years is expected to be 5.21/69.4/8.89 billion yuan, the net profit attributable to the parent company is expected to be 4.0/6.4/88 billion yuan, the corresponding EPS is 1.51/2.44/3.36 yuan, the corresponding closing price of 33.8 yuan / share on April 27, 2022, and the PE is 21 / 13 / 10 times respectively, Maintain the “buy” rating.
Risk tips
Rising prices of raw materials; The sales volume of major customers is lower than expected; The expansion of new projects and new customers is less than expected; The integration effect of Bailian Group is not as good as expected.
