Ping An Securities: Overweight rating on Huayu Auto

Wang Dean and Wang Jiehai of Ping An Securities Co., Ltd. recently conducted research on HASCO and released the research report “Strong performance in 3Q22, customer structure continued to be optimized”, this report gives an overweight rating to HASCO, and the current share price is 16.67 yuan .

  Huayu Automobile(600741)

  matter:

  The company released the third quarterly report for 2022. In the first three quarters of 2022, the company achieved an operating income of 113.3 billion (+13%), a net profit of 4.9 billion (+4%) attributable to the parent, and a net profit of 4.3 billion (+18%) after deducting the non-attributable to the parent. . In 3Q22, the revenue was RMB 44.6 billion (+32%), the net profit was RMB 2.4 billion (+20%), and the non-net profit was RMB 2.3 billion (+56%).

  Peace of mind:

  Strong performance in 3Q22, regaining lost ground in the second quarter due to the negative impact of the epidemic. The company achieved a net profit of 2.52 billion yuan (-8%) in the first half of 2022, and the scale of net profit achieved in 3Q22 is close to that in the first half of 2022. In terms of business segments, the company’s first three quarters of interior and exterior trim parts/functional parts/metal forming and molds/electronic and electrical device business net profits were 2.94 billion/1.54 billion/260 million/280 million, up 5%/8.3% year-on-year, respectively. 9.5%/302%, 60% of the net profit comes from interior and exterior decoration, and 32% comes from functional parts. The substantial increase in the profits of the electronic and electrical sector in 2022 is mainly affected by the company’s sale of a 27% stake in Shanghai Valeo Automotive Motor Wiper System Co., Ltd., a joint-stock company. In terms of profitability, the 3Q22 comprehensive gross profit margin was 14% and the net profit margin was 5.8%, both slightly higher than the 2021 full-year level. In 3Q22, the sales and administrative expense ratio was at a low level in a single quarter in recent years, and the R&D expense ratio was 4.6%, a year-on-year increase.

  The customer structure continued to be optimized, and the proportion of SAIC’s foreign customers continued to increase. In the first three quarters of 2022, the revenue of interior and exterior trim parts of the core business reached 81.5 billion (+12.3%). In 1H22, the supporting amount for Tesla/BYD is about 6.8 billion, and Huayu Auto benefits from the high growth of production and sales of Tesla and BYD. In 1H22, HASCO’s revenue from SAIC Volkswagen, SAIC-GM and other SAIC Group customers accounted for slightly less than 50% (summary caliber). SAIC Group’s production in the first three quarters of 2022 increased by 7% year-on-year. The production of car companies increased by 15%/-6%/22% year-on-year. Huayu actively explores new business opportunities. Auto interiors, seat frames, airbags, drive shafts, etc. have newly obtained some supporting supplies for models related to global platforms such as BMW Brilliance, Beijing Benz, Volvo, etc.; auto interiors, electric drive aluminum shells Covers, drive shafts, front subframes, brake calipers, lights, electric air-conditioning compressors, etc. newly obtained some supporting supplies for Tesla, NIO, BYD, Xiaopeng, Xiaomi and other related models; Lights, steering gears, transmission shafts, air-conditioning compressors and other related models have recently been supplied by Great Wall Motor, GAC Passenger Car, Chery Automobile, Geely Automobile and other related models. We are optimistic that the company’s revenue contribution from SAIC’s foreign customers will continue to increase.

  Profit forecast and investment advice: The company was greatly affected by the epidemic prevention and control in Shanghai in the second quarter, but the company accelerated to recover lost ground in the third quarter of 2022, and the deducted non-net profit in the third quarter hit a record high. In recent years, Huayu Auto has realized the independent control of its core main business. Its interior and exterior trims, seats, and lights are in the leading position in China. It has profound technology accumulation and outstanding scale effect. With Tesla and BYD as the leading The proportion of foreign customers represented by SAIC continues to increase, and HASCO’s leading position in the auto parts segment will gain better room for growth. HASCO has deployed globalization earlier, and overseas revenue accounts for nearly 20%. Continued integration has yet to yield profitability. At present, the globalization of China’s own brands is advancing rapidly, the export of Chinese cars is promising, and the overseas business of Huayu Motors will usher in a period of profit recovery. We maintain the company’s performance forecast, that is, the net profit forecast from 2022 to 2024 is 6.97 billion/8.04 billion/9.01 billion. As a leader in domestic auto parts, the company has a strong voice in the industry chain, and its main business industry has a prominent position and competition. The advantages are obvious. We believe that the optimization of the company’s customer structure will bring room for valuation improvement. The current PE valuation of the company is 10 times lower than the static value, and the company’s “recommended” rating is maintained.

  Risk warning: 1) Uncertain factors such as the epidemic and shortage of chips have led to lower-than-expected sales in the automotive industry, which in turn affects the production and sales of automobiles and the company’s product orders; 2) SAIC Group’s sales have declined, and about 50% of the company’s revenue comes from SAIC Group. SAIC Group has a greater impact on production and sales. If SAIC Group’s sales volume is lower than expected, it will affect the company’s performance; 3) The company’s expansion of customers outside SAIC Group is less than expected; 4) Raw material price fluctuations affect the company’s profitability.

According to the data of the research report released by the Securities Star Data Center in the past three years, the research team of Li Zijun of CITIC Securities has conducted in-depth research on the stock. The average forecast accuracy in the past three years is as high as 98.52%, and its forecasted net profit attributable to 2022 is 58.81%. 100 million, and the predicted PE converted from the current price is 8.78.

The latest profit forecast details are as follows:

The stock has been rated by 14 institutions in the past 90 days, 11 with buy ratings and 3 with overweight ratings; the average institutional target price in the past 90 days is 29.18. According to the financial report data of the past five years, the Securities Star valuation analysis tool shows that Huayu Automobile (600741) has a good competitive moat in the industry, average profitability and poor revenue growth. There may be hidden financial concerns, and the financial indicators to focus on include: accounts receivable/profit margin, operating cash flow/profit margin. The stock is 2.5 stars for good company indicators, 4 stars for good price indicators, and 3 stars for comprehensive indicators. (The indicator is for reference only, the indicator range: 0 ~ 5 stars, the highest is 5 stars)

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