Continue to build the strength of auto parts business and plan to acquire auto parts companies
June 22, 2021Company AnnouncementPlan to acquire 100% equity of Shanghai Passage Auto Parts Co., Ltd. (referred to as “Shanghai Passage”), and has already cooperated with Shanghai PassageshareholderSign the “Letter of Intent for Acquisition Offer.” Shanghai Pathe is mainly engaged in the research and development, production and sales of automotive aluminum alloy parts, with revenue of 960 million yuan in 2020 (Net profit120 million yuan, net profit margin 12.5%), the valuation range is 1.243-1464 billion yuan.
The company builds ToB new energy auto parts and other core component capabilities, and explores diversified development paths. Shanghai Passage has been established for 16 years and has a mature business and customer system. Through the acquisition of Shanghai Passage, it is expected to strengthen its auto parts business more quickly and help Diversified growth. We maintain our EPS forecasts of RMB 1.89, 2.34, and 2.94 for 2021-2023, and maintain a “Buy” rating.
M&AIt is expected to quickly form auto-zero business synergy capabilities
Aluminum alloy precision die-casting and CNC machining is one of the company’s four core component businesses. Customers include home appliance companies, new energy vehicles,Solar energyenterprise. Shanghai Passage mainly produces aluminum auto parts through die-casting and precision machining processes. The products mainly include electric drive parts, chassis parts, transmission parts and other aluminum auto parts. It has a leading business strength in the auto parts industry and has customers all over the world. At home and abroad. After the merger, it is expected to form a synergistic effect with the company’s new energy automotive zero business to help the rapid development of the business, and future growth is worth looking forward to.
The growth of the new energy automobile zero business is expected. Shanghai Passage’s business is mature and its profitability is ahead of Shanghai Passage’s 2020 revenue of 960 million yuan (net profit of 120 million yuan, net profit margin of 12.5%), and revenue from January to May of 2021. 550 million yuan (net profit of 60 million yuan, net profit margin of 11.0%). On the one hand, with the continuous growth of the new energy automobile market, the new energy automobile zero business has strong growth, and mergers and acquisitions are conducive to improving the company’s sustainable development capabilities; On the other hand, Shanghai Passage has mature business and strong profitability, and its net profit margin is higher than that of the company (the highest net profit margin in the past 3 years is 8.8%). Mergers and acquisitions are conducive to enhancing the company’s competitiveness and profitability.
Strategic upgrading continues to deepen, Big ToB is expected to accelerate growth
Taking into account that this acquisition is still in the planning stage, it will not affect the company’s operations andPerformanceThis will have a significant impact. We maintain the company’s 2021-2023 EPS forecasts of RMB 1.89, 2.34, and 2.94. The company has made efforts to transform new retail, expand category coverage, actively deploy cross-border, promote rapid growth of independent brands, and expand foreign sales to expand cooperative categories. Constructing the ecology of the four core components, entering the new energy automotive zero market, and actively acquiring high-quality targets may drive the rapid growth of the ToB business. As of June 22, 2021, Wind, a comparable company in the industry, has unanimously expected that the average PE in 2021 will be 39x. Some comparable companies are sought after by funds and the short-term valuation has increased significantly. Therefore, we still give the company 37x PE in 2021 and maintain the target price of 69.93. Yuan, maintain the “Buy” rating.
Risk warning: declining overseas demand; weak performance of diversified businesses; appreciation of the renminbi.
(Article Source:Huatai Securities）
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