\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 80 Wuxi Longsheng Technology Co.Ltd(300680) )
Event:
Wuxi Longsheng Technology Co.Ltd(300680) released the annual report of 2021 and the first quarterly report of 2022:
1) 2021: operating revenue of 930 million yuan, with a year-on-year increase of 60.83%; The net profit attributable to the parent company was 98 million yuan, a year-on-year increase of 81.94%; The net profit deducted from non parent company was 88 million yuan, with a year-on-year increase of 78.05%;
2) Q1 in 2022: operating revenue of 286 million yuan, with a year-on-year increase of 42.55%; The net profit attributable to the parent company was 29 million yuan, a year-on-year increase of 36.4%; The net profit deducted from non parent company was 28 million yuan, with a year-on-year increase of 33.66%;
Key investment points:
The company’s EGR products benefited from the implementation of the sixth national standard, and the EGR revenue in 2021 was 47.5% year-on-year. Benefiting from the national VI exhaust emission policy, the EGR penetration rate of light diesel vehicles has been further improved, and medium and heavy diesel vehicles have been transformed into EGR route. We estimate that the EGR market space is expected to reach 4.17 billion yuan after the implementation of the national VI, which is nearly seven times larger than that before the implementation of the national VI. at the same time, EGR has been further promoted in the standard configuration and application fields of new energy hybrid vehicles. The company’s EGR products have a good growth momentum, with an operating revenue of 328 million yuan in 2021, a year-on-year increase of 47.5%. In addition, the non road phase IV emission standard will be officially implemented on December 1, 2022, which will form a superposition effect with the implementation of the national VI emission standard, providing a strong driving force for the medium and high-speed growth of the company’s EGR system business.
The production capacity of motor iron core continues to expand, which is expected to usher in large-scale performance. Motor core is the core component of driving motor of new energy vehicle. New energy vehicles sold 3521000 vehicles in 2021, a year-on-year increase of 158%. In 2022, 1257000 vehicles were sold in Q1, a year-on-year increase of 140%, and the penetration rate has reached 19.3%. The company’s cumulative output of large-diameter drive motor iron core has been in a leading position in the Chinese market, covering most of the best-selling models in the market, and is expected to usher in large-scale performance with the increase of new energy vehicle penetration. In 2021, the company produced and sold 3611 / 353900 new energy automobile motor parts, with a year-on-year increase of 299% / 315%, and achieved a sales revenue of 136 million yuan. In 2020, the company has raised 230 million yuan to increase the production capacity of motor iron core by 1.2 million sets. In 2022, the company plans to increase 716 million yuan to expand the production capacity of motor iron core and build 10 production lines.
Micro research precision revenue increased by 57.56% year-on-year, consolidating the company’s precision parts sector. In 2021, the production and sales volume of the company’s precision parts products reached 845 / 818 million, with a year-on-year increase of 28.34% / 25.83%. In 2021, the revenue of Weiyan precision, a wholly-owned subsidiary, reached 556 million yuan, a year-on-year increase of 57.56%, and the net profit was 40 million yuan, a year-on-year decrease of 3.55%. Micro research precision has entered the stage of mass production in new energy electric drive power system parts, electric drive control system parts and seat belt system parts, and is expected to achieve sales growth in the next few years.
Large scale reduces labor and manufacturing costs, and the rising price of raw materials erodes the gross profit margin. The company’s revenue mainly comes from the auto parts industry, accounting for 96.31% in 2021. After large-scale production, the proportion of labor costs and manufacturing expenses in operating costs decreased from 19.53% / 9.58% in 2020 to 18.2% / 8.3% in 2021, a year-on-year decrease of 1.33pct/1.28pct. Due to the high price of raw materials in 2021, the price index of steel increased by 37.55% year-on-year and the price of silicon steel increased by 56.51% year-on-year, resulting in the decline of the company’s gross profit margin. The price of raw materials has dropped since November 2021, and the company’s gross profit margin is expected to be repaired in 2022.
Profit forecast and investment rating according to bezus information consulting, 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 penetration rate of new energy vehicles downstream of the motor core continues to improve, and the company’s continuous expansion of production is expected to usher in large-scale performance. Based on the principle of prudence, without considering the impact of this fixed increase on the company’s performance for the time being, we expect the company’s operating revenue to be RMB 1.766/2.527/3.523 billion respectively from 2022 to 2024, with a year-on-year growth rate of 90% / 43% / 39% respectively, and the net profit attributable to the parent company to be RMB 203 / 294 / 422 million respectively, with a year-on-year growth rate of 107% / 45% / 43% respectively. The corresponding dynamic PE from 2022 to 2024 is 17 / 12 / 8 respectively, maintaining the “buy” rating.
The risk suggests that 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
