(Report Producer/Author: GF Securities, Yan Jungang, Deng Chongjing)
First, the domestic excellent automotive electronic standard
(1) The company has gone through many cycles and regained its new life
Founded in 1993 and located in Huiyang City, Guangdong Province, Huayang Group has undergone many restructurings and transformed from a state-owned enterprise into a private enterprise. After 2000, the company seized the industry opportunity of switching from tape to disc in the multimedia industry, developed rapidly, and became the leader in the precision parts industry of video disc machine (DVD/VCD). Around 2010, as the multimedia industry iterated from the video disk machine to the digital age, the market shrank, and the company entered a downward channel. Subsequently, the company established a development direction, formed a business layout based on automotive electronics, precision electronic components, precision die casting, LED lighting, and obtained a second new life, the main customers great wall, Changan, GAC, BAIC, Zotye and other independent brands.
The company's business is mainly divided into four categories: automotive electronics (the core is central control /instrument/HUD products), precision die casting, precision electronic components, and LED lighting components. The business model of automotive electronics is to dock the needs between application software and car companies, maximize the utilization of chip resources, and is a bridge between car companies and chip manufacturers, so it is necessary to have the ability to integrate software and hardware. The company's core competitiveness lies in continuous innovation, productizing cutting-edge technological innovation, continuing to invest in high R&D, and maintaining a R&D expense ratio of more than 7% over the years.
In 2002, the company was restructured to establish a limited liability company Huayang Group, and at the same time introduced employee shareholding. According to the announcement of the first quarterly report of 2022, the company's controlling shareholder, Huayang Investment, holds 57.1% of the shares, and the second and third largest shareholders are Zhongshan Zhongke Equity Investment Co., Ltd. and Zhuhai Hengqin Zhongke Baiyun Equity Investment Fund, holding 8.3% and 4.7% of the shares respectively, both of which are financial investors held before the IPO. The actual controllers of the company include Li Guanghui, Zou Ganrong, Zhang Yuanze, Wu Wei, Li Daoyong, Sun Yongdi, Chen Shiyin, Zeng Renwu and other eight domestic natural persons, who hold 76.3% of the shares of Huayang Investment through Dayue First Investment and indirectly control Huayang Group.
The subsidiaries of Huayang Group that are mainly controlled or participated in the shares mainly include: (1) Huayang General Electronics Co., Ltd., which is mainly engaged in in-vehicle entertainment systems, GPS and other product businesses. (2) Huayang Multimedia Electronics Co., Ltd., mainly engaged in HUD (head-up display), vehicle wireless charging, laser head and its precision components and other products business. (3) Huayang Precision Machinery Co., Ltd., mainly engaged in precision casting and other products business. (4) Hua sunshine technology Co., Ltd., mainly engaged in LED chips, LED lighting and other products business. (5) Huayang Digital Electronics Co., Ltd., mainly engaged in precision electronic components, car rearview cameras, driving recorders and other products business.
(2) Automotive electronics continues to expand categories, which is the core of the company's four major businesses
Among the four major businesses covered by the company's products, automotive electronics is where profit growth and elasticity lie, and precision die casting provides stable cash flow. In 2021, the revenue of automotive electronics business was 2.95 billion yuan, +39.9% year-on-year, accounting for 65.6% of total revenue; the revenue of precision die casting business was 940 million yuan, +47.5% year-on-year, accounting for 20.9% of total revenue; the revenue of precision electronics business was 340 million yuan, -12.2% year-on-year, accounting for 7.7%; and the LED business revenue was 163 million yuan, +15.3% year-on-year, accounting for 3.6%.
Automotive electronics business: directly to the automakers to provide supporting services, according to the 2021 annual report disclosure, product coverage of intelligent cockpit, intelligent driving, intelligent networking three major areas, products including car audio and video, navigation, LCD instruments, head-up display (HUD), domain controllers, streaming media rearview mirrors, on-board cameras, automatic parking systems (APA), blind zone monitoring (BSD), driver monitoring systems (DMS), wireless charging, T-BOX, FOTA, etc.
Precision die casting business: mainly produces aluminum alloy, zinc alloy precision die casting parts, for the automotive key components, precision 3C electronic components and industrial control components and other fields. Among them, the key components of the automobile are mainly used in the chassis system, the steering system, the transmission system, the automobile engine and the gearbox, the new energy three-electric system (battery, motor, electronic control) and so on. Precision 3C electronic components are used in various types of connectors and structural parts in aviation, machinery, electronics, communications and other industries.
Precision Electronics Business: Mainly produces products related to optical disc applications, with a product line of movements, laser heads and components. Laser head and component products are mainly OEM, and movement products are independently developed and produced by the company.
LED lighting business: including LED packaging, LED lighting fixtures, etc., the main products include packaging products, intelligent lighting lamps, commercial and industrial lighting fixtures and so on.
(3) Continue to invest in high research and development, ushering in a period of high performance growth
The company continues to maintain a high investment in research and development, and automotive electronics continues to expand categories. The core technical competitiveness of automotive electronics manufacturers lies in relying on hardware and building software strength, which is a bridge between chip manufacturers and car companies. The company's advantages lie in: (1) rich cooperation experience with car companies to meet the personalized software and hardware needs of car companies; (2) strong hardware manufacturing experience and the ability to quickly land product engineering. The company continued to maintain a high R & D investment in the early stage, from 2014 to 2021, the company's R & D expenses climbed from 210 million yuan to 350 million yuan, and the proportion of R & D investment in revenue increased from 4.6% to 8.5%. The company continues to expand new categories in the automotive electronics business, and continuously deduces new product lines such as head-up display, ADAS parking, wireless charging, and independent digital power amplifiers from the central control and instrumentation.
Since 2018, the profitability of the automotive electronics business has continued to rise, and the precision die casting business has continued to grow steadily. From 2018 to 2019, the passenger car industry entered a downward channel, the company's automotive electronics business revenue declined, and the net profit attributable to the mother slid down to 0.2 billion yuan in 2018, mainly due to the decline in sales of tail independent customers such as BAIC Yinxiang and Zotye, and the delay in the progress of new projects. The company then took the initiative to clean up backward customers, make provisions for related inventory prices and bad debts, continue to optimize the customer structure, expand new advantages of independent and joint venture customers, profitability continued to rise, mainly engaged in central control instrument products Subsidiary Huayang General Electronics net profit margin increased from -3.7% in 2018 to 4.1% in 2021. Precision die casting business continued to develop steadily, operating income increased from 190 million yuan in 2014 to 940 million yuan in 2021, CAGR was +25.3%, and gross profit margin remained at about 30% for a long time (in 2021, due to the rise in aluminum prices of raw materials, gross interest rate was 25.7%). In terms of customers, the company continues to develop new projects and new customers, covering customers including continental Germany, BorgWarner, ZF and other Fortune Global 500 companies. (Source: Future Think Tank)
Second, automotive electronics: the central control instrument has grown steadily, and the HUD has opened up room for growth
(1) Demand and supply jointly promote the upgrade of the car cockpit, and the cockpit is entering the era of intelligence
The two sides of demand and supply are jointly promoted to empower the intelligent upgrading of the car cockpit. Demand side: The intelligent cockpit starts from the application scenario and is the most easily perceived intelligent experience for consumers. Consumers from the very beginning of the physiological needs of safety and comfort, and gradually developed to the current demand for emotional belonging and respect, the car is not only a travel tool, but a third space to meet the diverse needs of consumers; at the same time, with the application scenarios of consumer electronic products such as mobile phones gradually diverted to the car end, the recognition of smart cockpits has increased, and consumers' willingness to pay for smart cockpits has also been rapidly improved. Supply side: The intelligent cockpit is relatively difficult to achieve intelligent driving due to the low difficulty of technical implementation, and there are relatively strict regulatory constraints and classifications different from intelligent driving, so it is easier for car companies to achieve.
The intelligent upgrade of the cockpit is an important part of the intelligent process of the car. Whether it is the primary stage of intelligent driving or the driverless stage, the car still has the attribute of consumer goods. Sensors through the perception of the external environment, feedback to the car "brain", cockpit is an important way of human-computer interaction, the user's needs through the cockpit feedback to the car "brain", the car "brain" combined with internal and external information, after making decisions to achieve safe and reliable driving.
The car cockpit has experienced the era of mechanical, electronic and network connection, and is moving towards the era of intelligence. 60-90 years in the 20th century Instead of the mechanical era, the cockpit is mainly composed of mechanical instrument panels and simple audio playback equipment, and the physical button structure is single; 2000-2015 is the electronic era, and the small size of the central control LCD screen and navigation function are used; in 2015, it began to enter the era of network connection, the network level of the cockpit and the human-computer interaction ability are improved, and the size of the central control LCD screen becomes larger, but the system products are still distributed discrete control. With the upgrading of the demand for intelligent driving and the third living space, the technological breakthrough of perception, human-computer interaction, and chip performance, the cockpit products will be further upgraded, and applications such as cockpit domain controllers, multi-screen mutual integration and AR will be further popularized and enter a highly intelligent stage.
(2) Central control instrument: benefit from industry dividends + domestic substitution, product income has increased steadily
1. The volume and price of Zhongkong instrument products are rising together, and the domestic market is expected to reach 87.1 billion yuan in 2025, and the CAGR is 20%
The traditional central control realizes entertainment functions such as radios and CD players, and the safety level of automotive electronic functions is low, generally ASIL A. Traditional instruments realize the function of displaying vehicle speed and fuel consumption, and have a high level of safety, generally ASIL B. Driving force for the upgrading of central control products: on the one hand, based on the user's demand for entertainment, central control has entertainment attributes similar to mobile phones, on the other hand, the number of supported APP applications has increased, the performance requirements have been improved, and consumers are willing to pay. Instrument product upgrade driving force: based on the user's safety needs, used to show the car chassis failure, navigation and other needs increased, more intelligent driving functions in the later stage will also be displayed on the instrument, large-size full LCD instrument penetration rate is expected to continue to increase.
Central control and full LCD instruments are similar to consumer electronics attributes, and the penetration rate is constantly improving. As of March 2022, according to the statistics of autohome model configuration, the configuration rate of the 2010-2022 model central control and full LCD instrument (the ratio of the number of models with the central control function to the total number of models) has increased rapidly, and the standard penetration rate of the central control and full LCD meter of the 2010 model is 29.7% and 0.1%, respectively, and the penetration rate of the central control and full LCD instruments in the 2022 model is increased to 89.2% and 48.8%, respectively. Compared with the 2021 model, it increased by 15.1pct and 19.7pct respectively. From the perspective of terminal sales, the standard penetration rate of the full LCD instrument in 2021 (the ratio of the sales volume of the car with the function of the full LCD instrument to the total sales) is about 29.1%, and there is still a lot of room for improvement.
Central control and instrumentation are developing towards the trend of large screen. As of March 2022, according to the statistics of the configuration of autohome models, the configuration rate of the 2010-2022 models with central control and large-size screens above 8 inches has shown an upward trend. Among them, the 8-12-inch central control screen configuration rate in the 2022 models still accounts for the mainstream, increasing by 14.1pct to 51.5% compared with the 2021 model; the configuration rate of the central control screen above 12 inches is 6.5pct to 21.6% higher than that of the 2021 model. Among the models equipped with full LCD screens in 2022, the instrument screen configuration rate of more than 12 inches accounts for the mainstream, an increase of 14.5pct to 30.7% compared with the 2021 model; the configuration rate of the 8-12-inch instrument screen is 2.8pct to 10.9% higher than that of the 2021 model.
It is estimated that in 2025, the domestic central control and instrument market space is expected to reach 87.1 billion yuan, with a compound growth rate of 20%. According to our calculations, the penetration rate of central control and full LCD instruments in 2021 is about 86% and 32%. Based on the safety and entertainment needs of consumption, assuming that the penetration rate of central control and full liquid crystal instruments generally shows a growth trend, the growth rate gradually slows down with the increase of penetration rate, of which the full liquid crystal meter due to the current low penetration rate, so the penetration rate increase rate is relatively fast, by 2025 to 97%, 75% respectively. 2021 central control, full LCD instrument, ordinary instrument unit price are set to 1500 yuan, 1250 yuan, 300 yuan, the value of bicycles with the screen machine separation, screen large size, software upgrades and cockpit domain controller upgrades, showing a growth trend, the traditional instrument unit price remains unchanged, to 2025 the unit price is 1929 yuan, 1829 yuan and 300 yuan; domestic passenger car production growth rate. In summary, the market space of central control and instrumentation is expected to reach 49.1 billion yuan and 38 billion yuan respectively in 2025, with a compound growth rate of 15% and 30%.
2. Central control / instrument market pattern: the pattern is relatively scattered, and domestic substitution is accelerating
Central control / instrument products are in a period of rapid iteration of software and hardware, and domestic suppliers are expected to seize the historical opportunity to achieve rapid domestic substitution. The foreign suppliers in the domestic central control/instrument market mainly include international Tier 1 enterprises such as Bosch, Apotech, and Visteon. Previously, due to the long-term close cooperation and joint research and development with Renesas, NXP, Infineon and other cockpit chip companies, foreign investment has a strong competitiveness of products. With the intelligent upgrading of the car cockpit, more consumer electronics chip manufacturers have cut into the automotive industry, and the rapid iterative upgrade of the cockpit software has given domestic suppliers the opportunity to catch up. With the increasing maturity of domestic supplier technology, with rapid response service capabilities and cost advantages, the market share is expected to accelerate. Domestic participants mainly include Desay SV, Huayang Group, Joyson Electronics, Hangsheng Electronics and so on.
Compared with foreign-funded enterprises, on the one hand, due to the rise of the domestic consumer electronics industry chain, many software talents have been trained, a large number of electronic supply chains have been generated, and independent parts and components enterprises have gained cost advantages, on the other hand, independent parts enterprises have rapid response service capabilities to meet the needs of customized development of car companies.
The development process of domestic substitution of central control products is relatively fast, and liquid crystal instrument products are expected to replicate the development route of central control to achieve rapid domestic substitution. Zhongkong products mainly meet the user's entertainment functions, the functional safety level requirements are lower, the domestic substitution process develops rapidly, and the independent parts and components enterprises represented by Desai/Hangsheng/Huayang are more prominent. According to data from the Gaogong Intelligent Automotive Research Institute, in the 2020H1 domestic SYV multimedia market share, the top three market share are Desay SV (11.4%), Apofu (11.0%), and Hangsheng Electronics (7.5%). Due to the high safety level requirements of full LCD instrument products such as fuel consumption, speed, navigation and other indicators, Bosch (34.9%), Visteon (23.5%), and Magneti Marelli (12.0%) still occupy the top three in the industry.
3. Technical advantages + breakthrough in high-quality customers, the company's central control instrument products are expected to rise in volume and price
The company firmly grasps the industrial transformation and builds a strong software and hardware development capability. In terms of software, the software development platform "AAOP" developed by Huayang Group focuses on the platformization of intelligent cockpits, and creates an open and customizable soft and hard separation platform for the Internet of Vehicles ecosystem through vehicle-level standard devices, rich hardware configuration, unified software interfaces, efficient research and development mode and perfect diagnostic system. AAOP software standard architecture layer includes drive layer, middleware layer, application logic layer and UI layer, which can be flexibly adapted to car networking systems, such as Alibaba Zebra, Tencent Car Federation TAI, Baidu Duer OS, etc. In terms of chip hardware, according to the investor interactive platform, Huayang Group's cockpit domain control product line has covered mainstream chip solutions such as Qualcomm, Renesas, and Xinchi, and has obtained fixed-point projects for customers such as Chang'an and Great Wall.
Huayang Group relies on technology + cost advantages to accelerate domestic substitution. According to the investor interaction platform, the company's customer structure from the pre-listing Great Wall, BAIC, Zotye, further switch to the dominant car company brand, by 2022 customers have added Changan Autonomous, GAC Autonomous, Changan Ford, etc., the market share is expected to continue to increase. Looking forward to the future, with the cockpit similar to the mobile phone from the functional machine to the smart phone route, under the trend of architecture centralization, the cockpit develops in the direction of domain control, the software capability requirements increase, and the market share is expected to be concentrated among the dominant enterprises.
(3) HUD: It is about to usher in the inflection point of accelerated penetration and accelerated product revenue
1. The HUD is upgraded along the C-W-AR route, and the technical barriers are high
HuD (Full English name Head Up Display, Chinese called head-up display), its main function is to project important data (speed, oil, navigation, etc.) directly in front of the driver, thereby reducing the driver's behavior of looking down at the instrument during driving. The hardware architecture of the HUD includes information acquisition, control, projection display (PGU) units. The collection information unit is responsible for collecting vehicle condition information (such as vehicle speed, fuel volume, navigation, etc.) and road condition information, and the control unit is responsible for processing information; the projection display unit is responsible for generating projection images and projecting onto the windshield. In the past few years, due to the immature HUD-related technology and the general sense of consumer experience, the market penetration rate is low, and with the maturity of the technology, the HUD has gradually been recognized by consumers after the Volkswagen ID4, Weilai EC6, Great Wall Haval H6, GAC GS8 and other important models began to gradually mass-produce HUD.
HUD will continue to upgrade along the C-HUD, W-HUD, AR-HUD technology path. C-HUD is mainly used in the aftermarket, by placing a piece of transparent Plexiglass placed above the instrument for imaging, its imaging area is relatively small, the imaging distance is relatively close, and the projection content is small; W-HUD through the optical projection principle, the light is projected on the front windshield, forming a virtual image in front of the driver's line of sight, which can support a larger imaging area and a longer imaging distance. AR-HUD is the use of augmented reality technology, its imaging area is larger, the imaging distance is more than 10m, the road coverage can reach 100m, the display information is more abundant, to achieve 3D enhanced display.
The barriers to R&D and production of HUD mainly lie in the fact that the projection unit technology is difficult to break through, the software and hardware requirements for eliminating image distortion are high, and the rich optical practical experience must be possessed, and the customization ability must be available.
Barrier 1: Projection unit (PGU) technology is difficult to break through. The projection unit technology scheme is mainly divided into LCD (liquid display), DLP (digital light processing), LCOS (liquid crystal on silicon) three kinds. LCD solution due to the mature process technology, low mass production cost and other advantages, is currently the mainstream application of W HUD, but due to low brightness, small field of view and other factors, the future of the program may be gradually eliminated. DLP solution has a large field of view, high projection quality and other advantages, is the main technical solution for mass production of AR HUD, but because DLP is the united States TI patent technology, DMD chips and controllers are exclusively provided by TI, the cost of mass production is high, and the volume of DLP ARHUD is generally more than 15L, much higher than the TFT technology of 7-8L, so the application difficulty is higher. LCOS solution has many advantages such as low cost, high brightness and wide color gamut after mass production, but it is still difficult to apply on a large scale in the short term because the process technology is not yet mature.
Barrier 2: Eliminating image distortion requires high software and hardware. Since the freeform surface of the front windshield will lead to image distortion, the hardware aspect needs to be debugged through the freeform mirror and the windshield to eliminate the distortion of the picture, the accuracy requirements of the freeform mirror mold and the process requirements of the aspherical mirror are more stringent and need to be formed at one time; in terms of software algorithm, software algorithms need to be used to solve the "distortion" correction of the virtual image.
Barrier 3: Must have rich experience in optical practice. Because the front windshield is a reflective surface, the front and back sides are easy to create ghosting, in addition to parallax benefits, convex lenses lead to sunlight backfilling and burning out the projection unit and other optical problems, so a wealth of optical know how practical experience is required.
Barrier 4: Must have the ability to customize. HUD manufacturers need to participate in the early design stage of the car plant planning, and adjust the HUD parameters according to the needs of different models.
2. HUD ushered in an accelerated inflection point in penetration, and the domestic market is expected to reach 18.1 billion yuan in 2025, CAGR 79%
HuD standard terminal penetration rate is only 6.3% low, 2022 terminal penetration rate will usher in an inflection point to accelerate penetration. HuD as the "third screen" of the cockpit, when the central control /instrument screen has not yet been popularized, the overall configuration rate has increased slowly. As of March 2022, according to the statistics of autohome model configuration, the HUD configuration rate of models in 2010-2022 (the ratio of the number of models equipped with HUD functions to the total number of models) showed a slow increase, the standard and optional configuration rates of HUD models in 2010 were 0.9% and 0.1%, respectively, and the huD standard and optional configuration rates of 2022 models were increased to 11.2% and 15.3%, respectively, which was 4.8pct and 9.8pct compared with the 2021 models. From the perspective of terminal sales, the standard penetration rate of HUD in January 2022 (the ratio of vehicle sales with HUD functions to total sales) was about 6.3%, an increase of 1.8pct over the same period last year, which is still at a low level. According to the above on the one hand, the central control and instrument penetration rate have been raised to a higher position, on the other hand, the configuration rate of the 2022 model model has increased significantly compared with the 2021 model, and we judge that the HUD terminal penetration rate in 2022 will usher in an inflection point of accelerated penetration.
In January 2022, compared with the same period last year, the penetration rate of the standard HUD of the independent brand increased the most by car series; the penetration rate of 150,000-200,000 yuan was the most obvious in terms of price. According to the penetration rate of standard HUD sub-vehicle series, the penetration rate in January 2022 was Japanese (9.4%), autonomous (6.4%), American (5.7%), and German (4.8%), respectively, compared with +2.3pct, +2.5pct, +2.0pct, -0.3pct, and -0.3pct in the same period last year, and the increase in Chinese brand models was more obvious. According to the penetration rate of the standard HUD price range, the top four price bands of the penetration rate in January 2022 are 200,000-250,000 (15.5%), more than 300,000 (12.9%), 250,000-300,000 (10.8%), 150,000-200,000 (8.8%), +3.7pct, +3.6pct, +0.5pct, +3.8pct, and 150,000-200,000 price band models have increased significantly.
It is estimated that the domestic HUD market space is expected to reach 18.1 billion yuan in 2025, with a compound growth rate of 79%. According to our calculations, the penetration rate of HUD in 2021 is about 7% (including standard + optional), with the continuous iteration and penetration of high-level intelligent driving functions, the penetration rate of the central control instrument screen has increased to a high level, and the HUD as the third screen in the cockpit is expected to be rapidly popularized, assuming that by 2025, the HUD penetration rate will increase to 50%, of which WRUD will increase to 36%, ARHUD will increase to 14%. In 2021, the unit price of WHOD and ARHUD is set to 1,000 yuan and 3,000 yuan respectively, and the value of bicycles shows a decreasing trend with the maturity of technology; the growth rate of domestic passenger car production. In summary, the market space of WHOD and ARHUD is expected to reach 9.1 billion yuan and 9 billion yuan respectively in 2025, with a compound growth rate of 59% and 129% respectively.
3. HUD market pattern: the competition pattern is good, and the independent share is increasing rapidly
HUD is still in the product popularization period, foreign suppliers dominate, and domestic suppliers are accelerating their rise. Foreign-funded suppliers in the domestic HUD market mainly include mainland, Japanese Seiki, Denso and other international Tier 1 enterprises, due to the early research and development time of foreign-funded suppliers, close relations with joint venture car enterprise customers, there is a strong premium right, mainly supporting joint venture car enterprise customers. With the increasing maturity of domestic supplier technology, with rapid response service capabilities and cost advantages, the market share is expected to accelerate. Domestic participants mainly include Huayang Group, Taiwan Yili Electronics, Zejing Electronics, Future Black Technology, etc., mainly supporting independent brand customers.
As an intelligent incremental track for automobiles, HUD has increased rapidly in its autonomous share in recent years. At present, due to the low overall HUD penetration rate, models equipped with HUDs are generally high-end luxury joint venture models, so international Tier 1 suppliers account for the main share. According to data from the Gaogong Intelligent Automotive Research Institute, the top five market shares of standard HUDs in 2020 are Nippon Seiki (33.3%), Mainland China (27.0%), Denso (20.1%), Taiwan Yili (9.1%), and Jiangsu Zejing (3.6%). With the gradual maturity of technology and large-scale applications, the cost of independent Tier 1 suppliers has accelerated, and the top five domestic HUD market shares in 2021 are Denso (39.4%), Huayang Group (16.2%), Taiwan Yili (16.0%), Continental Group (11.1%), and Japan Seiki (9.3%).
4. Ten years of technology research and development reserves, the company's HUD revenue ushered in a period of release
The company's HUD R&D technology ranks among the forefront in China, and its products cover C-HUD, W-HUD and AR-HUD and corresponding solutions. The company leads the domestic counterparts, in 2012 set up an optical team, committed to huD product engineering research landing, has launched a more mature C-HUD, W-HUD and AR-HUD products and solutions, as of 2021 has more than 100 HUD patented technologies, ranking first in China. Relying on its own technical advantages in the intelligent cockpit, the company realizes the joint development of HUD and central control, instrumentation and other products, and is the "cockpit field expert" in the HUD industry. The company has independently built a complete AR-HUD platform, which can realize display inputs including ADAS, instruments, and navigation, and has launched a low-cost "TFT + optical film" AR-HUD solution and a high-performance DLP AR-HUD solution for the diversified needs of car companies.
According to the company's investor relations activity record on February 15, 2022, the company's W-HUD has been mass-produced and equipped with Dongfeng Nissan, Changan, and Great Wall models, and the AR-HUD is equipped with GAC GS8. As of March 2022, it has obtained the designated points of great wall, Changan, GAC, BAIC, Chery, Dongfeng Honda, BYD, Dongfeng, Jinkang Cyris, Vietnam Vinfast and other customers.
Compared to foreign-owned Tier 1 companies, the company has the ability to respond quickly and costly. Similar to the central control instrument industry, the rise of the domestic consumer electronics industry chain has not only cultivated software talents, but also produced a large number of electronic supply chains, so the company has a better cost advantage; on the other hand, the company as an independent parts and components enterprise, in the exploration stage of the intelligent cockpit industry, has the ability to respond quickly to meet the needs of customized development of car companies.
Compared with domestic HUD start-ups, the company, as a mature listed enterprise, has a good procurement scale advantage and rich customer resources. Compared with the new entrants in other fields, the company has nearly ten years of R&D technology reserves, mass production experience in the field of HUD and optics, and rich customer resources.
(4) Wireless charging, power amplifiers and APA and other categories are expected to continue to expand
1. The allocation rate of the vehicle wireless charging industry is still low, and the technical reserves for many years have helped the company's product revenue grow rapidly
Wireless charging technology, also known as non-contact charging, is the use of near-field induction, that is, through electromagnetic induction, magnetic resonance, electromagnetic wave radiation and other principles, to achieve the transmission of electrical energy from the power supply equipment to the electrical device technology.
The on-board wireless charging configuration rate is still low, and it is expected to usher in a period of rapid penetration in the next three years. Vehicle wireless charging does not need to frequently plug and unplug the charging cable, which can increase driving safety, improve the experience of mobile phone use and charging in the car, compared with wired charging, the charging efficiency is not much different, is a better application scenario. According to the statistics of autohome model configuration, the configuration rate of on-board wireless charging in 2014 models and before was 0%. With the improvement of the requirements of the younger generation of consumers for mobile phone configuration and personalization, the configuration rate of in-vehicle wireless charging functions has been continuously improved. As of March 2022, according to the statistics of Auto Home, the on-board wireless charging configuration rate in 2015-2022 showed a gradual upward trend, and the standard and optional configuration rates of on-board wireless charging in 2022 models increased to 20.6% and 10.1% respectively, respectively, an increase of 5.3pct and 6.5pct compared with the 2021 models. Considering the low value of on-board wireless charging bicycles (100-300 yuan) and the demand of consumers for the use and charging experience of mobile phones in the car, we judge that the configuration rate of on-board wireless charging will accelerate in the next three years.
According to our calculations, the domestic vehicle wireless charging market will be about 2.65 billion yuan in 2025, and the CAGR will be 51.7% in 2021-2025. If it is assumed that the domestic vehicle wireless charging penetration rate (the ratio of vehicle sales with vehicle wireless charging function to total sales) in 2021 is equal to the standard configuration rate of 2021 models of 15.3%, based on consumers' entertainment needs in the cockpit, the increase in the frequency of mobile phone use, the penetration rate of on-board wireless charging will increase rapidly, and the penetration rate will increase to 50% by 2025. Automobile production and sales are based on the previous assumptions. With the integration of high-voltage fast charging technology and more functions, the value of bicycles will increase from 150 yuan in 2021 to 200 yuan in 2025. It is estimated that the domestic market size will be about 500 million yuan in 2021, and the CAGR will be +51.7% in the next 4 years.
The global in-vehicle wireless charging market size is measured similarly to the above, assuming that global vehicle production increases from 81 million in 2021 to 90 million in 2025, and the penetration rate of in-vehicle wireless charging increases from 15.3% to 50% in 2025. It is estimated that the global market size will be about 1.86 billion yuan in 2021, and the CAGR will be +48.3% in the next 4 years, and the market size will grow to 9.00 billion yuan by 2025.
The company's vehicle wireless charging technology reserves are abundant, and it has become one of the high-quality suppliers of many car manufacturers at home and abroad. The company began to focus on the development of front-loading for in-vehicle wireless charging in 2012, and joined the WPC Alliance in 2013, taking the lead in passing the Qi1.2.4 standard certification in 2018. The product covers from 5W charging to 40W charging, supports the main mobile phone private fast charging protocol, and integrates NFC key and other technologies to achieve vehicle start control. It supports fast charging of many mainstream mobile phone brands, has automatic tracking function and integrates technologies such as mobile phone NFC car keys. According to the Record of Investor Relations Activities on December 29, 2021, the Company has obtained customer fixed-point projects including BYD, Great Wall, Changan, FAW, GAC, Jinkang Cyris, Chery, Dongfeng Lantu, Toyota, Yueda Kia, Changan Ford, Hyundai and so on. Technical highlights of the company's wireless charging products include:
(1) High compatibility and high charging efficiency. The company studies the size and connection coil of all mobile phones with wireless charging in the current market, and designs them adaptively to ensure high adaptability and maximum charging efficiency.
(2) Excellent EMC performance to avoid interfering with other equipment. The company's wireless charging products meet the highest level of EMC experimental requirements through excellent technical design. At the 120KHz operating frequency point, the electromagnetic radiation is minimized by using a sine wave method. When the user uses the radio and wireless key PEPS function, the charging frequency is actively adjusted and the PEPS function is avoided to avoid interference with other devices.
(3) Excellent heat dissipation performance. The company adopts cast aluminum heat sink, original structural design and passive heat dissipation design method to control the heating of mobile phones, while preventing the conduction of heat at the charging end and improving charging efficiency.
(4) Reliable security. The company's products have FOD detection, over-temperature, over-voltage, over-current protection and other functions, but also increased the human body by electromagnetic field radiation test, the product meets the ASIL B functional safety level requirements.
2. More topology logic such as independent digital power amplifiers and APA parking is expected to continue to be deduced
Under the background of intelligent electric + consumption upgrade, the penetration rate of independent digital power amplifiers is expected to accelerate. With the background of automobile electric intelligence and consumption upgrade, the user's sound quality of car audio has increased, the number of car speakers has increased, and the degree of professionalism has been higher, and the power of the built-in amplifier of the sound source host is not enough to drive professional-level speakers, and it is necessary to install more powerful independent amplifiers to obtain better acoustic effects. As of March 2022, according to the total configuration of autohome models, the configuration rate of 12 or more speakers in 2010-2022 models (the ratio of the number of models equipped with 12 or more speakers to the total number of models) showed an upward trend, and the standard configuration rate of 12 and above speakers for 2010 models was 0.4%, and the standard configuration rate of 12 and above speakers in 2022 was increased to 16.2%, an increase of 7.2pct over the 2021 model. With the gradual high-end of the models of independent brand car companies and the rapid penetration of electric intelligent vehicles, the penetration rate of models equipped with more speakers has increased rapidly, and we expect that the penetration rate of on-board independent digital power amplifiers will also increase rapidly.
With the research and technical reserve experience of automotive electronics, the company has incubated independent digital power amplifier products. According to the Investor Relations Activity Record Table from March 2 to 3, 2022, the company's digital power amplifier products equipped with dual DSP (digital signal processor) and multi-rad channels have been awarded the Great Wall and Chang'an fixed-point projects.
In addition, because automotive intelligence is still in the early stage of the industry, the company's reserves of technologies in the field of automotive electronics also include APA parking, DMS, fragrance, etc., and the follow-up product line is expected to continue to expand. (Source: Future Think Tank)
Third, precision die casting continues to rise, and other businesses are expected to stop falling and stabilize
(1) Benefiting from the general trend of automobile lightweighting, the precision die casting business continued to grow rapidly
Automobile lightweight is one of the important ways to achieve energy conservation and emission reduction. Under the background of double carbon, the automotive industry is bound to become the focus of energy conservation and emission reduction. 60% of the vehicle fuel in the fuel vehicle is used for the load vehicle weight, and the quality of new energy vehicles that are generally 100-200kg higher than the fuel vehicle consumes a larger proportion of the energy in the load weight. According to the European Aluminum Association, fuel vehicles can reduce fuel consumption by 0.3-0.6L per 100 kilometers per 100 kilometers, and pure electric vehicles can increase 2.5km endurance for each weight reduction of 10kg, and lightweight is an effective means of energy saving and emission reduction.
Material lightweight is an important way to reduce the weight of automobiles, and aluminum alloy is the most feasible lightweight material at this stage with superior performance. In October 2020, the "Energy-saving and New Energy Vehicle Technology Roadmap 2.0" issued by the Society of Automotive Engineers of China pointed out that automobile lightweight will become the focus of the future development of the automotive industry, and gradually build a mainland independent lightweight technology development and application system, focusing on improving the application system of high-strength steel in the near future, forming a lightweight alloy application system in the medium term, and forming a multi-material hybrid application system in the long term. The roadmap points out that in 2025, the aluminum alloy for automobiles and bicycles will reach 250kg. According to estimates, every 60kg of aluminum used in the car can reduce the fuel consumption of fuel vehicles by 0.41-0.81L, and the lightweight coefficient of electric vehicles can be reduced by 21.7%.
With advanced mold technology and manufacturing experience, the company's precision die casting business revenue will continue to grow steadily. The company's precision die casting business began in 2003, mainly producing aluminum alloy, zinc alloy precision die casting parts, currently has automotive key components, precision 3C electronic components and industrial control components and other product lines. The company's customers mainly include Continental, WABCO, Emerson, Densan and other Tier 1. In addition, with advanced precision mold technology, strong FA capabilities and quality control capabilities, according to the company's 2020 annual report, the company has successfully developed new customers such as PSA, Nansha Denso, Philips Electronics, and Zebra Technology of the United States, and successfully introduced high-quality projects such as Continental Europe, Honda and ZF (ZF) in North America. With the continuous expansion of precision die casting business in the application field of key automotive components, further optimization of production capacity and improvement of customer quality, the scale of business revenue will continue to grow in the future.
(2) Precision electronic components & LED lighting is expected to stabilize
The market for disk machines has shrunk, and the precision electronics business may stabilize through transformation. The company's precision electronic components began in 1993, mainly producing products related to optical disc applications, with movements, laser heads and components and other product lines, customers mainly include Hitachi, Shenzhen GaoMeifu Electronics, Xinmeng Electronics, Tianyu Feige, Guangyu Industry and so on. With the upgrading of consumption and industrial upgrading, the development of hardware storage and network storage, the video disk machine market continues to shrink, and the company's precision electronic business revenue continues to decline. The company actively responds to the shrinking market, on the one hand, through product optimization, customer optimization to improve operational efficiency, on the other hand to accelerate industrial transformation and upgrading, precision electronics business revenue is expected to stabilize.
Lighting LED trend, the company with many years of manufacturing experience, in the fierce market environment LED lighting business is expected to maintain a steady operation. LED can convert electrical energy into light energy, in the LED lighting source, mobile phones and TELEVISION and other backlight market rapid rise in the background, LED lighting industry scale rapid growth. The LED lighting industry includes upstream epitaxial wafers, chip manufacturing, midstream chip packaging and downstream luminaire manufacturing. Market participants include Cree of the United States, Taiwan E Optoelectronics, Taiwan Lite-On Electronics, Huayang Group, Lehman Optoelectronics, Moso Power, etc. Huayang LED lighting business began to layout in 2008, the business is mainly concentrated in the middle and lower reaches, involving LED packaging, LED light source manufacturing, LED lighting manufacturing, LED power supply, due to many enterprises into the relevant fields, resulting in fierce competition, low profit margins. The main cooperative customers of the company's LED lighting business include Philips, LG Electronics, Asahi Photoelectric, Ji Microelectronics, etc. With years of R&D and manufacturing capabilities, the company has transformed high value-added products such as intelligent lighting, European industrial and office lighting, and achieved steady development.
Fourth, profit forecasts and investment analysis
The company is mainly engaged in automotive electronics, precision die casting, precision electronics and LED lighting and other business research and development, production, sales, products benefit from the development of intelligence, lightweight, as well as the trend of consumption upgrades, the company's main business in the market continues to expand, there is a substantial increase in enterprise operating income.
Core assumptions of the main business:
(1) Automotive electronics business: benefit from intelligence, the central control instrument products benefit from the industry dividend and domestic substitution, product revenue continues to grow steadily; benefit from the continuous iteration and penetration of high-level intelligent driving functions and the penetration rate of the central control instrument has been raised to a high level, the third screen HUD product is expected to usher in the inflection point of accelerated increase in industry penetration, product revenue acceleration, open up growth space; based on the accumulation of rich automotive electronics R & D reserves and mass production experience, wireless charging, The product line of independent digital power amplifiers and APA parking continues to expand. It is estimated that the company's automotive electronics business will achieve revenue of 4.34, 59.3 and 7.83 billion yuan in 2022-2024, +47.3%, +36.7% and +32.1% year-on-year, and gross profit margin of 21.2%, 22.0% and 22.5% year-on-year.
(2) Precision die casting business: Benefiting from the background of lightweighting, advanced mold technology and manufacturing experience, the company's precision die casting business revenue will continue to grow steadily. It is estimated that the company's precision die casting business will achieve revenue of 1.17, 14.1 and 1.69 billion yuan in 2022-2024, +25.0%, +20.0% and +20.0% year-on-year, and the gross profit margin is 25.7%, 27.0% and 27.5%.
(3) Precision electronics business: Due to the shrinking business of the video disk machine, the business is facing transformation and seeking new development. It is estimated that the company's precision electronics business will achieve revenue of 3.1, 28 and 260 million yuan in 2022-2024, -10%, -8% and -7% year-on-year, and gross profit margins of 8.0%, 8.0% and 8.0%.
(4) LED lighting business: The LED lighting market continues to expand, but the competition is fierce, and the company's business is expected to remain stable. It is expected that the company's LED lighting business will achieve revenue of 1.8, 1.8 and 170 million yuan in 2022-2024, +8%, 0%, -5% year-on-year, and gross profit margin of 20.0%, 20.0% and 20.0%.
Compared with comparable companies, Huayang Group is one of the few companies in China that has achieved simultaneous intelligent and lightweight tracks, closely following the development trend of the automotive industry and having a good business structure. Automotive electronics business is the company's revenue growth and performance elasticity, of which the central control instrument steady growth, HUD acceleration, more product lines continue to expand, precision die casting business to provide stable cash flow, we believe that the company has a good ability to continue to grow.
We expect the company's EPS in 22-24 to be 0.89, 1.35 and 1.95 yuan per share, respectively.
(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].