(Report Producer/Author: Western Securities, Luo Yamei, Luo Weining)
First, focus on intelligence, lightweight, and actively layout automotive electronics
1.1 With automotive electronics as the core, the layout of four major business sectors
Huayang Group is a leading system supplier of automotive electronic products in China. Huayang Group was founded in 1993, the company is located in Huizhou, Guangdong, formerly known as Huayang Industry. In 2002, it was restructured into Huayang Co., Ltd., and in 2013, the company was changed to a joint-stock company and renamed Huayang Group, and was listed on the small and medium-sized board of the Shenzhen Stock Exchange in October 2017. In recent years, Huayang Group has focused on the product layout of automobile electrification, intelligence, networking and lightweight, and is committed to becoming a leading system supplier of automotive electronic products and their parts at home and abroad. After more than 20 years of transformation and upgrading, the company is currently mainly engaged in four major businesses such as automotive electronics, precision die casting, precision electronic components and LED lighting.
The company's core business is automotive electronics and precision die casting. In recent years, the company has focused on the product layout around automotive intelligence, lightweight (low carbon), has a more comprehensive intelligent cockpit product line and part of the intelligent driving product line, precision die-casting products in the application of key automotive components continue to expand, and gradually extend the application of other business sectors in the automotive field, enhance the competitive advantage of the industry chain. In the first half of 2021, the company's automotive electronics business and precision die casting business accounted for 65.6% and 20.9% respectively.
Automotive Electronics: The company began to develop the automotive electronics business in 2001, mainly providing supporting services to automakers. Product layout intelligent cockpit, intelligent driving and intelligent networking three major areas, mainly including car audio and video, vehicle intelligent network connection, car navigation, LCD instruments, streaming media mirrors, air conditioning controller, domain controller, head-up display (HUD), 360 surround view system, automatic parking system (APA), blind spot monitoring (BSD), driver monitoring system (DMS), car camera, wireless charging, T-BOX, FOTA, etc. After years of market accumulation, the company's automotive electronics business has a stable profitability. Since 2014, the business has been contributing the lion's share of profits, accounting for more than 65% of revenue in the first half of 2021. In the future, with the development of automotive intelligent trends, the proportion of automotive electronics business revenue is expected to continue to increase.
Precision die casting: The company's precision die casting plate mainly produces aluminum alloy, zinc alloy precision die casting parts, and currently has a comprehensive product line of key automotive components, precision 3C electronic components and industrial control components. Among them, the key components of the automobile are mainly used in the automobile chassis system, the automobile steering system, the automobile engine and transmission, the automobile transmission system, the intelligent key, the new energy three-electric system (battery, motor, electronic control), etc.; the precision 3C electronic components are widely used in various connectors and structural parts including aviation, machinery, electronics, 5G optical communications and other industries. Since the beginning of this year, Huayang Group's precision die-casting business has undertaken new fixed-point projects for customers such as Japan Seiki, Valeo, ThyssenKrupp, BYD, NINGDE Times, DJI, Sagitar Juchuang, Hella, Tyco (Automotive) and other customers, including die-casting parts such as new energy three-electric system, HUD, lidar, automotive connectors, smart keys and steering parts. In the first half of 2021, the company's precision die casting business revenue achieved high growth, operating income of 428 million yuan, an increase of 72.02% year-on-year.
Precision Electronic Components: The Precision Electronic Components segment mainly produces products related to optical disc applications. The segment of the optical disc business (including laser heads and movements) continues to shrink, but the company maintains a relatively stable revenue scale. In the first half of 2021, the precision electronic components business achieved operating income of 172 million yuan, accounting for 8.4% of the company's total revenue. LED lighting: The LED lighting business has LED packaging, LED lighting fixtures and other products. In the first half of 2021, the company's LED lighting business achieved operating income of 84.21 million yuan, accounting for 4.1% of the company's total revenue, and the sales revenue of intelligent lighting and domestic engineering illumination products increased.
1.2 Performance rebound opened up high growth, high R&D investment to maintain competitiveness
The rebound in performance opened up high growth. The company began to transform into an automotive electronics company in 2012, and from 2018 to 2019, the company was affected by the accounts receivable and inventory impairment of customers such as BAIC Yinxiang and Zotye Automobile, which reduced the company's overall profitability. Since 2019, the company has gradually improved the company's competitiveness through business focus, developing high-quality customers, continuous innovation, optimizing orders, reducing costs and increasing efficiency. Since 2020, the company's revenue and attributable net profit have entered a new stage of growth, and profitability has shown an upward trend. In the first three quarters of 2021, the company's operating income was 3.13 billion yuan, an increase of 47.8% year-on-year, and the net profit attributable to the mother was 210 million yuan, an increase of 133.1% year-on-year.
Profit margins are rising steadily. The company's gross profit margin has decreased year by year since 2016, bottoming out at 20.47% in 2018, and in 2019, the company optimized customers and optimized the order process, the proportion of sales of high value-added products was further improved, and the gross profit margin rebounded, increasing to 23.62% in 2020. Among them, the automotive electronics business in 2017-2020 was affected by the weakness of the automobile market, and the gross interest rate fell, but it remained above 20%; the precision die casting business stabilized at more than 30% by promoting the low-cost intelligent transformation of the factory and the special quality improvement.
R&D investment remains high, with intelligent core technology. The company is a leading domestic automotive electronics company, and its investment in intelligence has been maintained at a high level. The company's R&D expenses have grown steadily since 2014, and the R&D expense ratio exceeded 10% in 2018, significantly ahead of other expense rates. At the same time, the company further improves management efficiency and reduces management expenses. The company has core technologies in intelligent cockpit display (including HUD), in-vehicle perception, intelligent interaction, intelligent cockpit domain control, assisted driving, etc. The number of patents and invention patents in the past few years has shown an overall upward trend, as of the first half of 2020, the company has 627 patents, including 227 invention patents.
With independent brands as the cornerstone, we actively develop foreign brands. The company's automotive electronics business is favored by independent brands, of which Great Wall Automobile is the company's largest customer in the past year, with the arrival of a new round of product cycle of Great Wall Motors, the company's automotive electronics business is expected to fully benefit. Since 2021, the company's automotive electronics business has not only undertaken independent brand customers including Great Wall, Changan, GAC, Geely, BYD, BAIC, Chery, etc., but also obtained project orders from joint venture brands such as Changan Ford, PSA, Beijing Hyundai, Dongfeng Honda, Changan Mazda, and new power customers such as Baidu, Weilai, Weima, Xilis, Huawei, and Vietnamese Vinfast. Since 2021, the precision die casting business has successfully introduced new projects from customers such as Schaeffler, Denso, Tyco, Shanghai UMC, Wuhu Weipan, DJI, Hella, Fulin Seiko, ZF, Sagitar Juchuang, BYD and other customers.
Since 2021, it has cut into the supply chain of multiple mainstream models. Including Haval's third-generation H6, Haval Chitu, Tank 500, Changan CS75 PLUS, Changan UNI-T, GAC Trumpchi GS4 PLUS, GAC Trumpchi GS8, Qijie M5, as well as Changan Ford, BYD, Hezhong New Energy and other domestic and foreign car companies mass production projects, involving products including C-HUD, W-HUD, AR-HUD, LCD instruments, central control screens, wireless charging, NFC keys, car machines, APA automatic parking, etc.
1.3 The equity structure is stable, and multiple equity incentives highlight the confidence of development
The company's shareholding structure is stable. The controlling shareholder of the company is Jiangsu Huayue Investment Co., Ltd., and as of April 12, 2022, Jiangsu Huayue held 57.1% of the company's equity, which is relatively concentrated. Nanjing Yuecai, Nanjing Yuelong, Nanjing Yueyi, Nanjing Yuetong Four enterprise management co., LTD. are the company's employee shareholding platform, holding 76.3%, 13.8%, 8.1% and 1.8% of the equity of Jiangsu Huayue Investment Co., Ltd., respectively, of which Zou Ganrong, Li Daoyong, Wu Wei, Zhang Yuanze, Chen Shiyin, Li Guanghui, Zeng Renwu and Sun Yongdi, eight consistent actors hold a total of 67.31% of the equity of Nanjing Yuecai, which is the actual controller of the company, except for the controlling shareholder, Other personnel are deeply involved in the company's operation level and are deeply bound to the company.
The holding subsidiary is focused on the business and forms a support. The specific business of the company is undertaken by its subsidiaries, and the parent company undertakes the functions of investment management. Huayang GM, Huayang Digital and Huayang Multimedia undertake the company's automotive electronics and precision electronic components business, its Zhonghuayang GM is the company's most important subsidiary, undertaking AAOP, domain controllers, ADAS and other businesses, Huayang Multimedia mainly does HUD and wireless charging, Huayang Digital mainly does visual perception. Huayang Precision Machinery undertakes precision die casting business, and Huayang Electric undertakes LED electronics business.
The two equity incentives mobilized the enthusiasm of employees and highlighted the company's long-term development potential. In April 2020, Huayang Group issued the 2020 Stock Option and Restricted Stock Incentive Plan (Draft), which proposes to grant 6 million stock options to incentive recipients, representing 1.27% of the company's total share capital at the time of the announcement. For the first time, 4.5 million stock options were granted, representing 0.95% of the Company's total share capital at the time of the announcement, and 1.5 million stock options were reserved, representing 0.32% of the total share capital of the Company at the time of the announcement. The exercise price of the first grant of some stock options is $13.50 per share, and the total number of incentive recipients planned to be granted is 372. The Restricted Stock Incentive Plan proposes to grant 3,001,027 restricted shares of the Company for the first time to the Incentive Recipients, representing 0.63% of the total share capital of the Company of 473,100,000 shares at the time of the announcement of the Plan. Huayang Group's net profit attributable to the mother in 2020 reached 181 million yuan, an increase of 143% year-on-year, far exceeding the year-on-year growth target of 10% for the first equity incentive. In September 2021, Huayang Group issued the "2021 Stock Option Incentive Plan (Draft)", which intends to grant 3 million stock options, accounting for 0.6325% of the total share capital of the company at the time of the announcement, with no reserved interests. The exercise price of the stock options is $35.77 per share, and the total number of incentive recipients planned to be granted is 337. The company's 2021 equity incentive assessment indicators take into account the company's performance, the performance of its subsidiaries, and its individual performance. (1) The company's net profit growth rate is based on 2020, the trigger value in 2021/2022/2023 is 20%/44%/100%, the target value is 50%/80%/150%, and the target net profit is 2.72/3.26/453 million yuan. (2) Under the premise of the company's feasible rights, the feasible rights when the performance target achievement rate of the subsidiary company exceeds 80%. (3) The personal assessment result is greater than or equal to 60 minutes when the right is feasible. The equity incentive assessment is more comprehensive and operable, highlighting the company's confidence in development, and is conducive to fully mobilizing the enthusiasm and enthusiasm of the incentive targets. We expect the company's performance to be expected to achieve continuous growth and achieve the equity incentive target.
Second, the overall layout of automotive electronics, multi-product lines are promising
2.1 The smart cockpit moves towards the mobile intelligent space, and the product boundaries are constantly broadening
2.1.1 The car cockpit is moving from digital networking to domain control intelligence
At present, the intelligent cockpit has become an important anchor point in the global automotive industry, with the accelerated penetration of various functions such as 5G Internet of Vehicles, OTA, speech recognition, DMS, etc., the cockpit is moving towards the "third living space" of mobile travel. The car cockpit is entering the stage of domain control intelligence. In the process of automobile evolution from transportation to the third living space, the intelligent cockpit, as the core user interface connecting the two stages, is the core differentiation embodiment of the competitiveness of future car companies. The cockpit was originally just a simple combination of buttons and touch screens, and the cockpit of the current mainstream domestic models has developed into a 2.0 era marked by 4G network, SOTA, and intelligent voice interaction. The future intelligent 3.0 era is driven by artificial intelligence and big data, based on multi-mode interaction technologies such as speech, haptics, gestures, line of sight tracking, and emotion tracking, and multi-mode interactive integration and multi-screen linkage will become a new trend.
The realization of the domain control intelligent cockpit function relies on the integration of one core and multiple screens and the computing power support of the domain controller. The concept of the intelligent cockpit ranges from the touch screen of the car machine, to the LCD instrument + touch screen, and then to the 7-8 different displays in the front and rear rows of high-end cars today. In the future, it will no longer be limited to the realization of multi-screen interconnection, and will gradually integrate air conditioning control, HUD (head-up display), rearview mirror, human-computer interaction, DMS (driver monitoring system), OMS (occupant monitoring system), as well as T-BOX (vehicle monitoring system) and OBU (vehicle unit), to achieve cockpit electronic functions on a unified hardware and software platform. The same chip module supports devices such as central control large screens, digital instruments, and rear-seat entertainment screens, which can reduce the number of ECUs, avoid communication transmission problems between multiple chips, and reduce costs. The difficulty in achieving a core multi-screen is that the chip requires powerful processing power and a complex software operating system.
The domain-controlled smart cockpit phase will generate more demand for innovative electronics. Under the trend of electrification and intelligence, the car needs to present information such as power, mileage, battery status, high-precision map, etc. The traditional central control instrument has been difficult to handle the huge information, while the automatic driving function is gradually infiltrated, the driver's frequency of vehicle control is reduced, and the attributes of the third space of the vehicle will be increasingly strengthened. As the main entrance to human-computer interaction, the cockpit will be responsible for more functional integration, so it will also become the first unit of change for car companies. As shown in the L9 model disclosed by Ideal Auto in March this year, the domain controller supported by the high computing chip, the large screen/multi-screen display, the large-size AR-HUD, the multi-area voice interaction, and the wireless charging are all expected to become the weather vane for the electronic configuration of the passenger car cabin. (Source: Future Think Tank)
2.1.2 Domestic intelligent cockpit is expected to reach 100 billion in 5 years, with an average compound growth rate of more than 20%
We expect smart cockpit domain controllers to ship more than 8 million units domestically in 2025, with a 5-year CAGR of 68%. The development and ecology of smart cockpit domain controllers are similar to mobile phones, the industrial chain is relatively mature, and the cost is relatively controllable, it is easy to achieve rapid landing, and the application of 5G networks around the world will also accelerate the evolution of smart cockpit functions, and the software and hardware support of domain controllers is urgently needed. We believe that the shipment growth rate of smart cockpit domain controllers will be faster than that of autonomous driving domain controllers, and it is expected that by 2025, the shipment volume of smart cockpit domain controllers will exceed 8 million sets, the penetration rate of smart cockpit domain controllers in passenger cars will exceed 30%, and the five-year compound annual growth rate of shipments will reach 68%.
We expect the overall domestic smart cockpit market size to grow to 113.7 billion yuan in 2025, with a 5-year CAGR of about 20.8%. From the perspective of market segmentation, HUD, cockpit domain controllers and wireless charging have the most room for growth. From the perspective of the industry pattern, at present, the cockpit market at home and abroad is dominated by Tier1 such as Continental, Visteon, and Denso, and there is a large room for replacement for domestic parts suppliers.
2.2 The company can provide a full set of intelligent cockpit solutions, occupying the industry's first opportunity
Smart cockpits place higher demands on suppliers. Compared with the traditional cockpit industry chain dominated by the main engine factory, the cross-border integration trend of the main engine factory, Tier1 and technology/chip companies in the intelligent cockpit production chain is obvious. From the perspective of the main engine factory, on the one hand, the software and system development capabilities are lacking, compared with the technology companies, they are in a weak position, on the other hand, they do not want to completely open user and vehicle information to technology companies (such as BMW abandoning Android auto that requires too much vehicle information), and for technology /chip companies, vehicle-level applications and hardware integration experience is insufficient. The focus of the main engine factory is to control the user and vehicle big data, while the focus of the technology /chip company is the arms race of chip computing power, Tier1 as a middleman will play an important role in collaborative development, according to the needs of the main engine factory to provide customized operating systems, middleware, adapted to domain controller chips, electronic components and other hardware.
Huayang Group can provide a full range of cockpit solutions, occupying the opportunity of cockpit transformation. Huayang Group's product line layout in the field of intelligent cockpit is relatively complete, not only can provide domain controllers, but also independently develop in-vehicle entertainment systems, displays, in-vehicle communications and other cockpit terminal hardware, so as to provide a full set of intelligent cockpit solutions, provide more differentiated value-added services for vehicle enterprises, and achieve deeper binding with vehicle enterprises. At present, Huayang Group is one of the few Tier1s in China with the ability to provide a full set of cockpit solutions, and is expected to occupy the first opportunity for cockpit reform.
The company relies on the "four-step" strategy to achieve a full range of cockpit supply capacity. The first step is based on the layout of distributed independent products, such as central control entertainment, LCD instruments, air conditioning controllers, streaming media rearview mirrors, Internet of Vehicles, ADAS, etc.; the second step, the integration of central control entertainment, instrument functions, through the integration of structural design to achieve dual screen product landing; the third step, open up the information and data of various distributed equipment, the use of multi-modal interaction to achieve integrated intelligent cockpit human-computer interaction platform; the fourth step, the development of a number of different operating systems and security level functions integrated into the same platform, to meet the car SOA architecture with high-performance, highly integrated, highly scalable cockpit domain controller products.
The first step is to provide a rich lineup of cockpit products. In addition to HUD, Huayang Group's cockpit products also include in-vehicle audio-visual, in-vehicle intelligent network connection, in-vehicle navigation, LCD instruments, streaming media rearview mirrors, air conditioning controllers, driver monitoring systems (DMS), in-vehicle cameras, wireless charging, T-BOX, FOTA, etc. The company has newly expanded digital power amplifiers, fragrance systems, NFC keys and other projects. Wireless charging, digital key, DAB product sales continue to increase and continue to obtain new fixed-point projects; mounted dual DSP (digital signal processor), multi-speaker channel digital power amplifier products to obtain the Great Wall, Chang'an fixed-point project; streaming media rearview mirror to undertake a number of fixed-point projects, electronic exterior mirror has been introduced to the market.
1. Infotainment systems. Huayang infotainment system products cover AV, AVN and Radio, etc., through the appearance of technology, sound processing, image processing, navigation and positioning, mobile phone Interconnection and other aspects of the core technology mastered, can provide customers with cost-effective solutions, fast start-up speed, rich ecological resources, mobile phone Internet diversified information and entertainment products.
2. Air conditioning controller. Huayang has core sensor technology, comfort control algorithm and actuator control technology, and strives to provide customers with a full range of air conditioning control system products that are comfortable, safe, healthy, energy-saving and environmentally friendly.
3. LCD meter. With many years of experience in in-vehicle technology (such as QNX development, etc.), Huayang follows the instrument design specifications, continuously optimizes the design tools and processes, improves the safety level, and provides customers with stable performance, high-definition display, functional safety, and cost-effective LCD instrument products.
4. Wireless charging. It was the first to pass the Certification of the Qi1.2.4 standard, and has completed the interpretation of the draft Qi1.3 standard and reserved some technical solutions. From 5W charging to 40W charging, to adding NFC and other features, in-vehicle wireless charging products continue to innovate.
The second step is to integrate the functions of central control entertainment and instrumentation, and realize the landing of dual screen products through integrated structural design. The company relies on many years of experience in vehicle technology, optimizes design tools and processes, improves safety levels, provides customers with a strong sense of science and technology, rich and diverse instrument products, central control screen can provide 10.25 to 27 inches of multi-size products, customizable curved screens, special-shaped screens, etc., the use of magnesium aluminum alloys and stable characteristics, fully laminated coating to achieve a solid black, low reflection product experience, software continuous optimization to improve product reliability, communication performance suitable for mainstream suppliers.
The third step is to launch the "one core multi-screen" cockpit domain controller. Huayang Group's "one core multi-screen" cockpit domain controller, based on high-computing Power SoC chips, integrates the functions of multiple different operating systems and security levels into one platform, meets personalized needs with high performance, high integration, and high scalability, and realizes multi-screen interconnection and cross-screen display such as instrumentation, infotainment, co-driver screen, AR-HUD, etc. Huayang Group's cockpit domain control product line covers mainstream chip solutions such as Qualcomm, Renesas, and Xinchi, and has won customer fixed-point projects such as Chang'an and Great Wall.
The fourth step is to launch an open platform for domain control to fully meet the diverse needs of cockpit development of car companies. Huayang Open Platform ADAYO Automotive Open Platform (AAOP) through hardware abstract packaging, software layering, module standardization, to create a software and hard separation, flexible docking ecology of the open platform, the product has stable performance, rich configuration, unified interface, rapid diagnosis, efficient research and development, rich Internet of Vehicles ecosystem and other characteristics. It has been upgraded to AAOP2.0 and has enabled open source for intelligent cockpit systems. Huayang Open Platform (AAOP) also provides three versions for the automaker's own capabilities and diversified needs: AAOP-PRO edition, which provides a complete set of full-stack system solutions for OEMs; AAOP-STD edition, which is suitable for OEMs or third parties only doing upper-level applications; and AAOP-Lite edition, which only provides hardware platforms with basic software.
Based on the cockpit full solution capability, the company is building a multimodal interaction system. Before the fully automated driving became widespread, it was still dominated by human driver control at this stage. This means that the increase in the complexity of the cockpit functions will also exacerbate distractions, such as the use of touch screens that often require hands and eyes, which can easily distract the driver. Multimodal interaction is proposed in this context, through the fusion of visual, voice and other modal perception data, can achieve more accurate, more intelligent, more humanized interaction, as little as possible to occupy hand, eye resources, significantly reduce driving distraction. Especially with the rapid improvement of algorithms and chip computing power, multi-mode interaction can achieve more and more functions, and even began to combine hearing, touch, smell and other modes, constantly optimize the active interaction of the car to people, truly realize the driving task as the center, give users a variety of car experience while ensuring driving safety, so it is becoming the mainstream program of cockpit interaction. Huayang's latest multi-modal interaction system, based on high-computing power AI chips, through visual, auditory, tactile, multi-mode pre-fusion, multi-mode post-fusion and other recognition technologies, can achieve 4 categories, 70+ human-computer interaction scenarios, including voice + gesture driving window or air conditioning, visible speaking, getting on the car to greet, children crying and soothing, voice control, face start engine, line of sight light screen, driver behavior monitoring and dangerous behavior reminders. At present, the customer-specific projects of related products have reached the state of mass production.
Vertical upgrading and horizontal expansion, Huayang Group's cockpit products continue to achieve volume and price increases. The cockpit is moving from mechanical instruments and car radios to central control screens and LCD instruments, which will bring about an increase in the value of bicycles, and the penetration rate of multiple screens such as dual screens and triple screens still has a large room for improvement. At the same time, the existing in-vehicle information system, in-vehicle entertainment system, driver information system may be supplied by different suppliers, with the large-scale popularization of domain controllers, a core multi-screen solution is expected to become the future automotive standard, parts manufacturers are expected to become a single product supplier to become the solution provider of the overall solution to the intelligent cockpit, thus driving the overall supporting value of the increase. At the same time, Huayang Group's HUD, wireless charging, streaming media rearview mirrors, DMS and other cockpit electronics will provide consumers with more abundant configurations. The rich cockpit product line will boost Huayang Group's products to achieve a simultaneous increase in volume and price.
2.3 The company's intelligent driving products achieve coordinated development
The company's intelligent driving products are new. Huayang intelligent driving products include sensors (cameras), in-vehicle perception, driver assistance systems such as ADAS warning, 360 surround view, fusion vision automatic parking APA, blind spot monitoring BSD, etc., and are continuing to introduce new products. The company's Yu Eye camera, 360 surround view system, APA and other products have mass production or fixed-point projects.
1. Automatic Parking System (APA). With the help of the perception integration of camera and radar, the product has a variety of types of parking space detection, dynamic path planning, automatic parking in and out of the parking and other functions, to solve more than 90% of the parking difficulties.
2. "Eye-catching" technology. Huayang"Yu Eye" technology can quickly and accurately identify the camera internal reference on the production line, and store the internal insurance in the camera, which further improves the accuracy of the camera in the camera AA process, thereby ensuring the accuracy of the algorithm of ADAS application and improving the user experience.
3. 360 Surround View System. Since 2013, Huayang GM has been supporting 360 surround view system products for front-loading customers, after nearly 8 years of technology upgrades and product iterations, on the one hand, the image has increased from standard definition to ultra-high definition, the camera viewing angle has increased, on the other hand, it has increased 3D 360 ° panoramic image display, front and rear dynamic trajectory lines, and ADAS functions such as BSD, MOD, LDW, DVR, etc.
Third, the star single HUD competitive advantage is prominent, and the development prospects are broad
3.1 HuD is developing rapidly and is expected to become the mainstream interaction method of cockpit
3.1.1 W-HUD is currently the mainstream product, AR-HUD is the direction of development
HUD (Head-Up Indicator) information display is more convenient, reduces line of sight shift, and can significantly improve driving safety. HUD head-up display (head-up display), also known as head-up display system. HUD was first used in the aviation field, in 1988 General Motors took the lead in applying this technology to the automotive field, in 2003 BMW became the first European car company equipped with HUD, since then a number of automakers began to assemble HUD in their own models. By projecting important driving information onto the front windshield glass or translucent Plexiglas, the HUD enables the driver to see the vehicle and road condition information in a head-up state, avoiding accidents caused by the driver's head down and line of sight shift.
HUD products have undergone three generations of upgrades, C-HUD, W-HUD, AR-HUD. Among them, W-HUD and AR-HUD are currently the mainstream solutions.
1.C-HUD imaging is average, and the share is gradually shrinking. The C-HUD (Combiner HUD) mirrors information to a transparent panel (called a Combiner) rather than a windshield, which is less expensive but has average imaging results.
2. W-HUD with more mature technology is the mainstream of the current market. W-HUD (Windscreen HUD) is the most common type of HUD technology available, with information displayed directly on the windshield. The driver sees a virtual image rather than a static image on the windshield, and due to its high technical threshold, suppliers need to master the electronic and optical requirements of the W-HUD.
3. AR-HUD is being favored by more and more car companies for future upgrades due to its larger imaging area, longer projection distance and high integration with the real driving road environment. AR-HUD is actually a type of W-HUD system, which integrates driver monitoring and forward object recognition systems with data fusion and image processing functions to provide real-time image correction. For example, virtual symbols are precisely drawn onto the road to show the driver their navigation wizard. ArhuD offers the advantages of a wide viewing angle and a long VID for greater safety and fatigue. At the same time, the advantage of a wide viewing angle can integrate the virtual image with the real world, suitable for adding ADAS information and navigation information, and can adjust the driver's experience to the best.
AR-HUD will lead the way in the future. AR-HUD can display a wider and farther virtual image and automatic driving prompt information, effectively improving the automatic driving function experience and improving safety, which is an inevitable trend of future head-up displays. Since 2021, many car companies have successively announced the deployment of AR-HUD products in new cars, including joint venture models such as Mercedes-Benz S-Class, Audi e-tron, and Volkswagen ID series, as well as faw Hongqi E-HS9, WEY Mocha, WEY latte, Geely Xingyue L, GAC GS8 and other independent models. In addition, SAIC, Changan, chery, etc. are also planning to carry AR-HUDs. In March 2022, with the official announcement of the ideal second model, the L9, the large huD became the "replacement" for traditional instruments. In addition to the traditional display of vehicle speed, navigation and other information, the HUD for the first time will be projected on a traditional LCD instrument to project a visual ADAS is also integrated. Volvo Cars also released a cockpit concept map in March, which also highlights the importance of large HUDs for in-vehicle displays. We believe that in the next few years, the large-size HUD + small instrument/steering wheel interactive screen is expected to become the mainstream of information interaction in the car.
TFT and DLP are the main technical routes for HUD. Projection technologies currently used in HUD include TFT projection, DLP projection, laser scanning projection and LCOS projection. Among them, TFT has become the main projection technology of W-HUD with its high maturity, low cost and good performance, and DLP technology is expected to become a mainstream technology with the popularity of AR-HUD.
1. TFT-LCD projection technology: the most common, most mature and cheapest HUD projection technology, the principle of TCT-LCD is that white light forms red, green and blue tri-color light through the color separation mirror, and then achieves the projection effect through the liquid crystal monomer. However, because the brightness decreases after the light passes through the liquid crystal, and there is a distance between the liquid crystals, the image resolution is reduced;
2. DLP projection technology: Is the patented technology of Texas Instruments in the United States. The light source is reflected to the projection lens by a DMD that integrates hundreds of thousands of ultra-miniature lenses to form an image. The DLP has temperature rise control characteristics and is suitable for AR-HUDs, which require high heat resistance of the device. In the future, DLP technology will become the mainstream technology with the popularity of AR-HUD;
3. Laser scanning: Unlike the other three projection technologies, it uses laser as a light source and forms a projection through a MEMS micro-galvanometer without complex optical systems;
4. LCOS projection technology: the light source is projected into three LCOS panels after being projected through the color separation mirror, and then the image is formed by the light convergence system. (Source: Future Think Tank)
3.1.2 HUD front-loading is equipped with more than one million vehicles, and the compound growth rate is expected to reach 85% in the next five years
HuD domestic front-loading capacity of more than one million vehicles, Huayang Group took the lead in breaking the monopoly of foreign giants. According to the data of Gaogong Intelligent Vehicles, in 2021, the standard hudder volume of new passenger car front-loading huds in the Chinese market (excluding imports and exports) was 1.1672 million units, an increase of more than 50% year-on-year, and the standard front-loading equipment rate was 5.72%. Among them, Toyota, Haval and Buick ranked in the top three. At present, HUD foreign suppliers are mainly DENSO, Japan Seiki, Continental, Bosch, etc., and domestic suppliers include Huayang Group, Yili Electronics, Jiangsu Zejing, Future Black Technology, etc. In 2020, Huayang Group took the lead in breaking the monopoly of foreign giants and supporting Great Wall Motors.
We expect the HUD market size to reach $14.7 billion by 2025 and a CAGR of 85% over 5 years. HuD can be used as the main way of human-computer interaction for intelligent drivers, which can display driver assistance information, improve driving safety, and bring better driving experience. At the same time, with the breakthrough of HUD technology, the display effect has been greatly improved, the supporting price has gradually declined, and the cost performance has gradually increased. With the maturity of HUD technology and the continuous mass production of HUD models, we expect that the huD occupancy rate of passenger cars is expected to expand to about 48% in 2025, of which W-HUD penetration is expected to reach 30% and AR-HUD is expected to reach 14%. We expect that the value of domestic passenger car AR-HUD bicycles is expected to drop to 2500 yuan in 2025, and W-HUD is expected to average about 800 yuan, corresponding to the AR-HUD market size of about 8.3 billion yuan, the W-HUD market size of about 6.4 billion yuan, the total HUD market size of about 14.7 billion yuan, and the 5-year CAGR of up to 85%.
3.2 The company occupies the HUD first-mover advantage, and the market share is expected to further increase
Huayang Group continues to work hard, and the domestic market share has risen to the second place. Overseas giants such as Japan Seiki, Continental, and Denso started early in the HUD field, and their technology development is mature, and they will occupy the vast majority of domestic market share before 2020. According to data from Gaogong Intelligent Vehicle, the share of Japan Seiki, Continental Group and Denso in the Chinese market in the first half of 2019 was as high as 90.16%. In the past two years, the domestic HUD suppliers represented by Huayang Group have initially opened the market by relying on excellent technology research and development and cost control capabilities, and Huayang Group's market share in China has increased from 2.39% in 2020 to 16.28% in 2021, ranking second, second only to Japan Seiki, and has become the leader of HUD independent suppliers.
The company has achieved systematic advantages through years of accumulation and offers mature HUD products. Based on the optical reserves of many years of movement technology and micro-projection machine technology, Huayang Multimedia has established a HUD team since 2012 and has been deeply engaged in the HUD field for nearly ten years, with more than 100 HUD patented technologies. Over the years, the company has accumulated comprehensive advantages such as optical path design, mature software algorithms, UI boundary design and service customization capabilities. At present, more mature C-HUD, W-HUD and AR-HUD products and solutions have been launched. Versions 1.0 and 2.0 of the company's W-HUD have been released, and the 2.0 version has reached mass production at the end of 2021, and W-HUD3.0 is under development.
In 2022, Huayang Group will accelerate its expansion of customers, and its domestic market share is expected to continue to expand. Huayang Group has become the leader of HUD's independent suppliers, and its customers have expanded from independent brands to the supplier system of many international brand car companies, and continue to communicate with domestic new energy car companies. In the early stage, new orders were successively mass-produced, and shipments increased significantly year-on-year since the beginning of this year. New order development continues to improve, this year to undertake the Great Wall, Dongfeng, Jinkang Cyris and other car companies of the new fixed-point projects, as of now has obtained more than 10 car companies fixed-point projects, sales prospects are broad, will continue to impact the foreign giants of the industry-led situation.
Fourth, profit forecast
Key assumptions and profit forecasts
The automotive electronics business continues to expand and is the main force of the company's growth. The company's star product HUD breaks through the core technology to provide mature W-HUD and AR-HUD solutions. Huayang Group has become the leader of HUD's independent suppliers, customers not only include independent brands, but also expand to traditional joint venture car companies, with broad sales prospects, will continue to impact the foreign giants of the industry-led situation. The company's automotive electronic layout intelligent cockpit, intelligent driving and intelligent networking three major areas, mainly including car audio and video, vehicle intelligent network connection, car navigation, LCD instruments, streaming media mirrors, air conditioning controllers, domain controllers, head-up display (HUD), 360 surround view system, automatic parking system (APA), blind spot monitoring (BSD), driver monitoring system (DMS), car camera, wireless charging, T-BOX, FOTA, etc. Since 2021, the company's automotive electronics business has not only undertaken independent brand customers including Great Wall, Changan, GAC, Geely, BYD, BAIC, Chery, etc., but also obtained project orders from joint venture brands such as Changan Ford, PSA, Beijing Hyundai, Dongfeng Honda, Changan Mazda, and new power customers such as Baidu, Weilai, Weima, Xilis, Huawei, and Vietnamese Vinfast. We expect the company's automotive electronics business revenue growth rate to be +48% / +35% / +36% in 2021-2023, respectively. As the company's business scale advantage gradually emerges, the gross profit margin of 22%/23%/24% is expected to increase steadily.
The competitiveness of precision die casting continues to improve. The company is mainly engaged in automotive key parts, precision 3C electronic components and industrial control components and other product lines, to provide customers with product collaborative development, mold design and manufacturing, precision die casting and machining, surface treatment, assembly and other one-stop services. Since 2021, we have successfully introduced new projects from customers such as Schaeffler, Denso, Tyco, Shanghai UMC, Wuhu Weipan, DJI, Hella, Fulin Seiko, ZF, Sagitar Juchuang, ANDD. With advanced precision mold technology, FA capabilities and quality control capabilities, Huayang Group has become one of the most competitive enterprises in the precision die casting industry. We expect the company's precision die casting business revenue growth rate of +43% / +21% / +19% and gross profit margin of 31.6% / 32.0% / 32.4% from 2021 to 2023, respectively.
Precision electronic components and LED lighting components: The precision electronics segment mainly produces products related to optical disc applications, and the market segment continues to shrink, and we expect the company's precision electronic components business revenue growth rate from 2021 to 2023 to be -14% / -11% / -3%, and the gross profit margin is stable between 10-11%. The LED lighting sector is mainly LED packaging, LED lighting fixtures and other businesses, accounting for about 4.1% of revenue in the first half of 2021. We expect the company's LED lighting devices business revenue growth rate of +3% / -0.1% / -18% in 2021-2023, respectively, and the gross profit margin is stable between 18-19%. It is estimated that the company's operating income in 2021-23 will be 45.6 / 58.4 / 7.55 billion yuan, respectively, with a year-on-year growth rate of +35% / +28% / +29%.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].