Baolong Technology (603197): Performance is expected to return to faster growth Automotive electronics will enter the harvest period

Baolong Technology (603197): Performance is expected to return to faster growth Automotive electronics will enter the harvest period

Investment Highlights 2019 performance is expected to return to the mid-high-speed growth trajectory: due to the impact of domestic automobile production and sales remodeling, fluctuations in raw material prices, and exchange losses, equity incentives, research and development expenses, and other expenses, the company’s performance in the first three quarters of 2018 was lower than ourExpected early last year.

With the gradual weakening of the overdraft effect caused by the preferential tax rate for purchases, the bottom-up of the national economy and the accumulation of wealth effects caused by the upward movement of the stock market, we expect that the automotive industry will begin to enter the booming upward cycle in the second quarter.

With the recovery of downstream automobile production and sales, the company’s business revenue growth rate is expected to gradually pick up; TPMS business is rapidly ramping up, and automotive electronics and lightweight structural parts are gradually mass-produced. From 2019, the company’s performance is expected to return to the medium-high-speed growth track.

The TPMS business is the main driving force for the rapid growth of performance in the next two years: the mandatory installation regulations for domestic passenger cars TPMS have been officially implemented from January 1, 2019, and the penetration rate of TPMS will accelerate from 2019 to 2020.TPMS market space outlook is about 19 from 2018.

It will grow from USD 2 million to approximately USD 41 million in 2020, with a compound annual growth rate of 50.

6%.

The company’s TPMS investment and production capacity has been in place by the end of 2018. The first phase of the Hefei plant is expected to be completed and put into operation in June 2019. By then, the company’s TPMS transmitter and controller production capacity will be expanded from about 7.5 million and 1.5 million to 25 million and 3.5 million, respectively.Only, an increase of about 233%.

The BH SENS established by the company and the Huo Fu Group has already landed at an early stage. By integrating the TPMS business and assets of both parties in China, Europe and North America, the new company is expected to become one of the global TPMS market leaders.

Taking into account the favorable factors such as policy promotion, production capacity release, and strong alliance with the Huofu Group, we expect the company’s TPMS business to usher in heavy volume growth in the next two years.

Automotive electronics 四川耍耍网 and lightweighting business opens the ceiling for medium- and long-term growth: (1) The company’s automotive electronics locates the car sensing layer, and gradually moves from TPMS, sensors and other in-car sensing components to 360 ° surround view systems, millimeter-wave radar, and dynamic vision systems.Upgrade and development of external sensor.

Among them, sensor products have been awarded by SAIC Passenger Cars, Shenlong, Chery and other customers, and revenue has grown rapidly; 360 ° surround view system has been approved by Geely projects, and it is expected to start mass production in 2019; millimeter-wave radarIn the future, dynamic vision systems are expected to make breakthroughs in Yutong buses.

(2) Lightweight business is an extension of the company’s traditional business (exhaust system pipe fittings). The 南宁桑拿 product has gradually expanded from exhaust system pipe fittings to passenger car sub-frames, automobile instrument beams and other lightweight structural parts. At present, it has been equipped with Volvo.Some models of customers such as Cadillac and Geely.

We believe that the company’s layout in the field of automotive electronics and lightweight structural parts and the development of automotive intelligence and lightweight have two major development trends, and already have certain technological advantages in some products. In the future, new products and new production capacity will continue to land.The above-scale business is expected to take over TPMS, becoming an important driving force for the company’s continuous growth in long-term performance.

Investment suggestion: The company’s performance in 2018 is under pressure, but as the industry gradually picks up, TPMS business is growing rapidly and new businesses such as automotive electronics and lightweight are gradually being ramped up. From 2019, the company is expected to return to the medium-high-speed growth track.

We forecast the company’s annual revenue from 2018 to 2020 to be 1.

00 yuan, 1.

40 yuan and 1.

69 yuan, return on net assets were 10.

2%, 13.

3% and 14.

9%.

Maintain “Buy-A” investment rating.

Risk warnings: Lower-than-expected production and sales of automobile by downstream customers; slower-than-expected arrival of new automotive electronics; substantial increase in raw material prices; exchange rate changes