Huajin Securities: Gave an overweight rating to Sulian shares

Huajin Securities Co., Ltd. Li Hui recently conducted research on Sulian shares and released a research report "The gradual advancement of new projects in the industry boom, the company's development is expected to improve", this report gives an overweight rating to Sulian shares, and the current stock price is 35.05 yuan.

Sulian shares(301397)

Investment Essentials

Event content: On the evening of April 10, the company disclosed its 2023 annual report. In 2023, the company will achieve operating income of 1.011 billion yuan, a year-on-year increase of 19.00%, and net profit attributable to the parent company of 151 million yuan, a slight decrease of 1.74% year-on-year. At the same time, the company announced the profit distribution plan for 2023, proposing to distribute a cash dividend of 10.0 yuan (tax included) for every 10 shares, and increase 2 shares for every 10 shares to all shareholders with capital reserves.

The company's revenue in 2023 will achieve steady growth, in line with market expectations, but due to the annual decline and the impact of expenses, the growth rate of net profit has slowed down. In 2023, the company will achieve operating income of 1.011 billion yuan, a year-on-year increase of 19.00%, and net profit attributable to the parent company of 151 million yuan, a slight decrease of 1.74% year-on-year. 1) The company's revenue will grow steadily in 2023, of which the new energy vehicle business will contribute an important increment to the revenue growth. IN 2023, THE COMPANY WILL CONTINUE TO DEVELOP NEW ENERGY VEHICLE PRODUCTS ON THE BASIS OF EXISTING CUSTOMERS, AND ACTIVELY DEVELOP NEW CUSTOMERS, DURING THE REPORTING PERIOD, AS A TIER1 COMPANY IN THE AUTOMOTIVE INDUSTRY, IT HAS SUCCESSFULLY ENTERED THE SUPPLY CHAIN OF NEW CAR-MAKING CUSTOMERS INCLUDING IDEAL AUTOMOBILE, HEZHONG AUTOMOBILE AND GAOHE AUTOMOBILE, AND THE COMPANY'S NEW ENERGY VEHICLE BUSINESS REVENUE IN 2023 WILL BE 435 MILLION YUAN, A YEAR-ON-YEAR INCREASE OF 28.32%, MUCH HIGHER THAN THE COMPANY'S OVERALL REVENUE GROWTH RATE, ACCOUNTING FOR ABOUT 43.05% OF THE TOTAL REVENUE, WHICH IS AN IMPORTANT PART OF THE COMPANY'S REVENUE. 2) The company's gross profit margin declined, and the impact of the superimposed expense side caused the net profit growth to slow down slightly. In 2023, the company's gross profit margin will be 28.11%, down 4.61 percentage points year-on-year from 2022, and we tend to believe that the decline in gross profit margin is related to the continuous intensification of competition in the automotive industry since 2023; At the same time, in order to maintain its competitive position in the market and leading technology, the company's expense investment showed a year-on-year growth trend, of which the amount of sales expenses increased by 44.45% year-on-year compared with 2022, the amount of management expenses increased by 38.95% year-on-year, and the amount of R&D expenses increased by 33.50% year-on-year.

In 2023Q4, the year-on-year growth rate of the company's net profit attributable to the parent company in a single quarter slowed down again. In 2023Q4, the company achieved revenue of 332 million yuan, a year-on-year increase of 16.28%, a slight slowdown from the revenue growth rate in the third quarter, and a net profit attributable to the parent company of 40 million yuan in a single quarter, a year-on-year decrease of 25.22%, continuing the downward trend in the third quarter, with a decline of 15.92 percentage points. For the year-on-year decline in net profit in 2023Q4, it is expected that there may be two main reasons: one is that the fluctuation of raw material prices has affected the company's gross profit margin in a single quarter, and the other is that the cost investment in a single quarter has increased significantly. 1) According to the data of the General Administration of Customs, the average unit price of imported polyamide (including PA6, PA12, etc.) in the first three quarters of 2023 was US$6187.26/ton, US$6020.39/ton, and US$5578.78/ton, respectively, while the average unit price of imports in the fourth quarter rose to US$6375.00/ton, an increase of about 14.27% compared with Q3; 2) At the same time, in order to maintain its competitive advantage and industry position, the company expanded new customers and new products by adding new sales personnel in 23Q4, resulting in a year-on-year increase of 84.7% in 23Q4 and 89% month-on-month increase in 23Q3.

The industry boom superimposed on the successive implementation of new projects, and the company's development is expected to improve. According to the statistics of the China Association of Automobile Manufacturers, the sales volume of new energy vehicles in the mainland from January to March 2024 will be 2.09 million, a year-on-year increase of 31.8%, of which the company's core customer BYD continues to be the champion of domestic new energy sales, with a cumulative sales volume of 626,300 units in the first quarter of 24, a year-on-year increase of 13.44%. 2) The company actively promotes the expansion of new customers, and has obtained supplier certifications from brand car companies including Ideal, Hezhong, Dongfeng Nissan and other brands, and according to the company's announcement in October 2023, the company has added new models such as the new M7, M9 and Qiyuan, among which the cumulative delivery of 85,800 vehicles from January to March 2024, a year-on-year increase of up to 6 times, and the development momentum is relatively strong. 3) In terms of new project designation, the company will add more than 1,000 new product designations in 2023, and currently has more than 2,000 projects under development. According to the 2023 annual report and related announcements, the company expects to increase its production capacity by more than 30% year-on-year in 2024 and increase its output value by more than 500 million yuan in 2025.

In the new business direction, the company is actively making a comprehensive layout around liquid cooling. The company invests significant R&D resources in the field of liquid-cooled thermal management systems for both vehicle and non-vehicle applications, including fluid paths, connectors, control components, and heat exchange. 1) In the field of passenger cars, the company has developed a liquid-cooled thermal management system pipeline dedicated to pure electric new energy vehicles according to the working conditions and characteristics of the three major systems of battery, motor and electronic control, and will continue to promote the certification and mass production of new product lines in the future to further increase the coverage of the company's liquid-cooled pipelines. 2) In the field of non-passenger vehicles, the company is actively promoting the application of liquid-cooled products in energy storage, battery charging and swapping equipment, heavy trucks and engineering equipment, among which the progress in the energy storage business is relatively fast; according to the company's 2023 annual report, the company has completed the formal review of the domestic leading energy storage system integrators Hyperstron and Sermatec Energy, and has shifted to the stage of comprehensive business cooperation, and is expected to achieve a certain degree of growth in the next two years.

Investment suggestion: The company's revenue in 2023 is basically in line with expectations, and looking forward to 2024, the new energy vehicle industry is expected to maintain prosperity. In the long run, the company is one of the scarce automotive nylon pipeline manufacturers in China, or benefit from the acceleration of the penetration of automotive nylon pipelines in the future, and at the same time, the company actively deploys new businesses such as liquid cooling, which is expected to bring new growth points. We expect that the total operating income from 2024 to 2026 will be 1.233 billion yuan, 1.518 billion yuan and 1.827 billion yuan respectively, with a year-on-year growth rate of 22.0%, 23.2% and 20.3% respectively, the corresponding net profit attributable to the parent company will be 173 million yuan, 219 million yuan and 260 million yuan respectively, with a year-on-year growth rate of 14.7%, 26.6% and 18.6% respectively, the corresponding EPS will be 1.73 yuan, 2.19 yuan and 2.60 yuan respectively, and the corresponding PE will be 20.3x. 16.0x, 13.5x, first coverage, give overweight -A rating.

Risk warning: the risk of prosperity of the new energy vehicle industry, the risk of new business development falling short of expectations, the risk of macroeconomic and industrial policies, the risk of high customer concentration, the risk of raw material prices, the risk of technological innovation, the risk of market competition, etc.

According to the calculation of the research report data released in the past three years, the research team of Wang Liusheng of China Merchants Securities has conducted in-depth research on the stock, with an average forecast accuracy of 77.22% in the past three years, and its forecast attributable net profit in 2024 is 190 million yuan, and the predicted PE is 18.45 based on the current price.

The breakdown of the latest earnings estimates is as follows:

A total of 4 institutions have rated the stock in the last 90 days, 2 have given a buy rating and 2 have an overweight rating.

The above content is compiled by Securities Star based on public information, generated by an algorithm (Network Information Calculation No. 310104345710301240019), and has nothing to do with the position of this site, if there is a problem with the data, please contact us. This article is a compilation of data and does not constitute any investment advice for you, investment is risky, please make a cautious decision.