Text | Ding Di
Edit | Zheng Huaizhou
With the advancement of the global carbon neutrality process, the "low-carbon" development of the automotive industry has become the general trend.
As one of the effective means for the industry to achieve energy conservation and emission reduction, lightweight has grown rapidly in recent years. Especially after Tesla introduced integrated die-casting technology, a huge revolution in automobile manufacturing processes and materials has emerged, which has increased the amount of aluminum alloy in automotive materials and brought new incremental opportunities to upstream related manufacturers.
As the 82nd stock listed on the Beijing Stock Exchange last year, Yoshioka Precision, which focuses on precision castings, has also increased its layout of its automotive aluminum alloy business in 2021. With the competitive advantage in technology and products, the company has successfully entered the supply chain of giants such as Ningde Era, LG, Tesla and so on, further opening up the imagination of future performance growth.
However, judging from the reaction of the capital market, the market does not seem to buy its identity as a "Tesla concept stock". Since its listing on November 24, 2021, the company's stock price has fallen all the way, if you calculate the opening price of 40.88 yuan / share on the first day of listing, as of January 14, 2022, the cumulative decline of the company's stock price has exceeded 40%, and the market value has evaporated by nearly 600 million yuan.
So, as a hidden giant in the field of precision parts, does Yoshioka Precision have the basis for long-term investment?
This article attempts to answer the following questions:
As the invisible giant of the Beijing Stock Exchange, what is the driving force behind the rapid expansion of Yoshioka Precision's performance?
What's the future?
Is it worth paying attention to in the long term?
Concealed faucets for cleaning home appliance parts
Founded in 2002, Yoshioka Precision is an enterprise dedicated to the production of precision castings of aluminum and zinc alloys. Since its establishment, the company has continued to cultivate in the field of die casting and precision processing, and has formed a product system based on electronic and electrical parts, auto parts, and supplemented by other parts. In 2020, the company recorded revenue of 260 million yuan, of which electronic and electrical parts revenue accounted for 56%, auto parts revenue accounted for 35%, other parts revenue accounted for 9%, electronic and electrical parts is the company's most important source of income.
Figure 1: Yoshioka Precision Revenue Growth and Segmentation Ratio Data source: wind, 36Kr finishing
Reviewing the performance of Yoshioka Precision, in the past 5 years (2017-2021), the company's development can be roughly divided into two stages:
(1) The positive transition period from 2017 to 2019. As the traditional business (office equipment, textile machinery, etc.) entered the mature market stage, the company's performance encountered a growth bottleneck. In order to further broaden its revenue streams, the company has stepped up the development of new businesses. On the one hand, we continue to invest in the field of steam heaters, rely on our own proprietary technology, create steam heater products, and successfully enter the clean home appliance industry chain; on the other hand, actively develop the power tool business and enter the supply chain of a series of well-known power tool manufacturers such as Makita and Bosch.
With the gradual start of new business, the company's revenue has also ushered in steady growth. From 2017 to 2019, Yoshioka Precision's operating income increased from 160 million yuan to 210 million yuan, cagring 8.5%, of which, as the fastest growing power tool business, the proportion of this business has remained at about 25% since 2018, driving the proportion of related electronic and electrical parts revenue from 25% in 2016 to 47.5%; the net profit attributable to the mother in the same period has increased steadily in the range of 20 million to 30 million.
(2) 2020 began to enter the thick accumulation and thin hair period. In 2020, under the influence of the epidemic, the demand for home disinfection under the home economy model has grown rapidly, and the demand for clean home appliances such as steam mops has continued to rise. According to the data of the Prospective Industry Research Institute, the global clean home appliance market size increased to 28.54 billion US dollars in 2020, an increase of 25.3% year-on-year; among them, the Chinese market, under the lower penetration rate, the CAGR of the clean home appliance market in 2016-2019 was 28.0%, and the 20.1% increase in 2020 was 20.1% year-on-year, and the overall growth stage was in a relatively rapid growth stage; overseas markets, under the supply of mature products, the scale of the clean home appliance market in 2016-2019 was in a slow growth stage. However, in 2020, benefiting from the outbreak of the epidemic, the demand in overseas markets has expanded beyond expectations, driving the rapid expansion of demand for clean home appliances, especially products with sterilization and disinfection functions.
Figure 2: Global clean home appliance market size Data source: Essence Securities, 36Kr collation
On the whole, driven by the accelerated expansion of market demand, the market size of new clean home appliances represented by steam mops has grown rapidly. With the excellent product strength and technical barriers accumulated over the years, Yoshioka Precision has successfully entered the supply chain of Shark, the world's leading steam mop brand, becoming the designated supplier of its steam heater parts, and also using Shark to enter the supply chain of well-known cleaning appliance manufacturers such as Coworth and Ningbo Haige.
Figure 3: Use of Yoshioka Precision Steam Heater Data Source: Essence Securities, 36Kr Finishing
Benefiting from the growth of downstream demand, from 2018 to 2020, the average annual compound growth rate of Yoshioka precision steam heater business revenue reached 49.9%, driving the company's performance into a new expansion period, 2020-2021H1, the company's revenue growth rate was 25.0% and 64.5%, respectively, and the growth rate of attributable net profit was 60.2% and 86.2%, showing good growth.
At the same time, the competitive advantage formed in the field of steam mops and other components has also attracted the favor of downstream leading enterprises such as millet, and the company's steam heater products are currently in the stage of millet sample modification.
Looking forward to the future, benefiting from the steady expansion of the clean small household appliances industry and the gradual expansion of the number of downstream customers of the company, it is expected that the clean home appliance related business will still be in a rapid expansion stage in the medium and long term, and together with the power tool business to help the steady growth of electronic and electrical components revenue, providing a solid basic disk for the company's long-term performance.
Automotive lightweighting is expected to lead to new growth poles
While the steady expansion of the power tool business has formed a performance base plate and the accelerated expansion of clean home appliances has brought more growth, for the future performance of Yoshioka Precision, combined with the mainstream view of the market, we believe that the expansion of the scale of the aluminum alloy auto parts business brought about by the trend of automobile lightweighting will provide more incremental space for its long-term performance.
In recent years, with the continuous prominence of global environmental protection issues and the increasing prominence of climate change, it has become a consensus of major economies around the world to achieve carbon neutrality goals through energy conservation and emission reduction.
As an important source of environmental pollution and carbon emissions, automobile exhaust has made the low-carbon transformation of the automobile industry a general trend. Among them, supporting the development of new energy vehicles and the overall lightweight of automobiles is the key to achieving the goals of energy conservation and emission reduction and low-carbon development of the automobile industry. According to the guidance of the Ministry of Industry and Information Technology, the "Energy-saving and New Energy Vehicle Technology Roadmap 2.0" revised and compiled by the Society of Automotive Engineers of China, by 2025, the mainland will achieve a fuel consumption of 4.6L/100km (WLTC) for new cars of passenger cars (including new energy); the average fuel consumption of new cars of traditional new energy passenger cars is 5.6L/100km (WLTC); new energy vehicles will account for about 20% of total sales.
Since 2020, with the intensive introduction of relevant policies in various countries, the penetration rate of new energy vehicles has accelerated. As one of the common basic technologies of energy-saving vehicles, new energy vehicles and intelligent networked vehicles, lightweight is an important way to effectively achieve energy conservation and emission reduction of automobiles.
Automobile lightweight refers to the integration and application of structural lightweight design technology with a variety of lightweight materials and lightweight manufacturing technologies under the condition of meeting the requirements of automobile use, safety and cost control to achieve weight reduction of automotive products. According to the report of the European Aluminum Association, for every 100kg reduction in the weight of the car, 0.6L of fuel can be saved per 100 kilometers, and the CO emission reduction of 800-900g can be reduced; according to the research of Siemens, among the many energy-saving measures such as power systems and power batteries, the lightweight of the car ranks first with an energy-saving potential of 46%.
Figure 4: Advantages of automobile lightweight in energy conservation and emission reduction Data source: Huafu Securities, 36Kr finishing
At present, the path to achieve automobile lightweight is mainly divided into three categories: 1) the use of lightweight materials instead of ordinary steel structures, such as high-strength steel, aluminum alloys, magnesium alloys, carbon fiber materials, etc.; 2) the use of lightweight manufacturing processes, including laser welding, hydraulic forming, hot forming, lightweight connection and Tesla-led integrated die casting, etc.; 3) the use of structural lightweight design to achieve product weight reduction, including size optimization, shape optimization, topology optimization, etc. Among them, the material lightweight superposition of lightweight manufacturing process is currently the most direct and effective path.
Figure 5: The main ways of automobile lightweighting Data source: Huafu Securities, 36Kr finishing
Among the many lightweight materials that can replace steel, as shown in the table below, aluminum alloys have obvious advantages over other materials in combination with the comprehensive comparison of cost, weight reduction potential and manufacturing process. Among them, compared with high-strength steel, aluminum alloy has high specific strength, small density and great potential for weight loss; compared with magnesium alloy and carbon fiber, aluminum alloy cost is lower, and the molding process and connection method are more mature. In addition, due to the large reserves of aluminum itself, good corrosion resistance and high recycling rate, it has gradually become the mainstream material for automobile lightweighting.
Figure 6: Comparison of various material properties and costs Data source: Huafu Securities, 36Kr collation
Looking ahead, it is expected that with the gradual increase in the penetration rate of new energy vehicles in the world and the acceleration of lightweight technology, the amount of aluminum used in bicycles in automobiles as a whole is expected to increase significantly. In particular, after Tesla and other leading enterprises actively introduced integrated die casting technology, while improving the production efficiency of new energy electric vehicle manufacturing, it also brought about a revolution in the process and materials of automobile manufacturing. According to relevant reports, under the integrated die-casting technology, more than 80% of the die-casting materials are aluminum alloys.
Figure 7: Aluminum lightweight design of major car manufacturers Data source: Minsheng Securities, 36Kr finishing
Taking Model Y as an example, the aluminum alloy casting after the integrated casting of the rear body baseplate weighs about 66Kg, according to the data of Huafu Securities, if it is simply calculated in 66Kg increments, compared with the current 179.2Kg and 208.2Kg of aluminum used in European passenger cars and North American light vehicles, Tesla's integrated casting process is only 30%-40% of the increase in the amount of aluminum used in bicycles on the back plate. In the future, with the integrated die-casting of the entire assembly of the car body, the market space for the amount of aluminum used in bicycles will be further opened.
Figure 8: Continental automobile lightweight process Data source: Essence Securities, 36Kr collation
So, driven by the general trend of the industry, how big is the market size brought by automobile lightweighting?
According to the calculation of Essence Securities, benefiting from the accelerated penetration of new energy vehicles and the rapid growth of single-vehicle aluminum under the trend of lightweighting, it is expected that in 2023, the amount of aluminum used in the mainland automotive industry will reach 8.893 million tons, and if the past average selling price of each ton of cast aluminum products is 75,000 yuan / ton, it is expected that the market size of the automotive aluminum casting industry in 2023 is expected to reach 665.18 billion yuan, with an average annual compound growth rate of more than 20%.
Figure 9: Automotive lightweight market space measurement Data source: Essence Securities, 36Kr collation
Under the broad market space and rapid growth rate, as a related parts supplier, Yoshioka Precision has increased its investment in research and development of auto parts business, and the company has successfully entered the supply chain of the world's top enterprises.
In 2020, the company's battery connectors to achieve mass production, its end customers for the Ningde era; starter shell to achieve mass production, become the world's well-known automotive manufacturers BorgWarner's first-class suppliers; after entering 2021, the company further accelerated the expansion of downstream automotive customers, august the company for LG production of motor rotor products have also achieved mass production, will be applied to LG motor products; at the same time, the motor structural parts products jointly developed with customers have passed the testing stage and smoothly entered the Tesla supply chain system. It will be used in Tesla Model 3 and Model Y models.
On the whole, through increasing in-depth cooperation with international auto industry leaders, the company has further broadened its own profit channels. Driven by new energy vehicles and lightweight-related businesses, the company's performance ushered in rapid expansion. Among them, the revenue of the auto parts business in 2021H1 recorded 0.59 billion yuan, an increase of 68.2% year-on-year.
In summary, under the premise of the steady expansion of power tool business revenue, Yoshioka Precision has continuously expanded its profit channels by actively exploring new business. At present, the company's downstream new energy vehicles and clean home appliances belong to the boom track, and the close cooperative relationship between Yoshioka Precision and leading large customers ensures the stability of the order source, as of August 2021, the company's order amount in hand has reached 71.131 million yuan, an increase of 58.0% over the same period last year. Benefiting from the expansion of the order scale and the optimization of the product structure, the future will provide more imagination space for the company's performance growth and profitability improvement.
Therefore, from the perspective of long-term investment opportunities, the company has good growth prospects. The three major businesses of power tools, clean home appliances and new energy vehicles are in an upward cycle, and the growth of the overall performance in the future is more optimistic.
But at the same time, we also need to note that as a parts supplier in the upstream of the supply chain, under the current large customer binding strategy, Yoshioka Precision generally lacks the right to speak to downstream customers. With the gradual rise of new business, the problem of its downstream accounting has become more prominent, which has increased the company's bad debt risk to a certain extent. According to the financial report data, from 2019 to 2021H1, the company's accounts receivable were 0.54 yuan, 0.77 billion yuan and 0.78 billion yuan, accounting for 32.7%, 35.5% and 28.5% of the total assets; and 25.8%, 29.5% and 45.9% of the operating income, showing a trend of increasing year by year.
The downstream accounting problem has also further affected the company's liquidity, bringing certain debt risks. Combined with the financial report data, due to the slower downstream payment collection, so the company mainly relies on short-term bank borrowing and other financing methods to meet the capital needs required in the daily operation process, 2019-2021H1, the company's short-term borrowings are 0.02 billion yuan, 0.41 billion yuan and 0.45 billion yuan, since 2020, there has been a substantial increase, exacerbating the future debt repayment pressure. In the same period, the company's quick ratio was 0.79, 0.92 and 0.81 respectively, which was lower than the industry average.
From the valuation point of view, as of January 14, Yoshioka Precision's stock price was 23.4 yuan, with a market value of 2.15 billion yuan, corresponding to PE38.6 times after deducting non-deductions, and the market value shrank by nearly 600 million yuan compared with the early days of the market in November.
Although the company's main business is still derived from electronic and electrical components, we believe that its future imagination space lies mainly in the increase brought about by the trend of automobile lightweighting after cutting into the supply chain of new energy vehicles. Compared with traditional business, the overall prosperity of new energy vehicles is higher, and the advantages of the track will bring more premium space to the company, especially after successfully cutting into the supply chain of head enterprises such as Ningde Times and Tesla, it is expected that under the blessing of related concepts, the company's revenue and valuation are expected to benefit for a long time.
In view of this, we have selected Fengguang Precision and Qijing Machinery, which are similar to their business, and Aikodi and Xusheng shares, which focus on automotive aluminum alloy precision casting business, as comparable objects, with an average price-earnings ratio of 55.6 times after deducting non-deductions. If the net profit attributable to Yoshioka Precision in 2020 is simple and calculated by 43 million yuan, the corresponding reasonable valuation of the company should be about 2.4 billion yuan, which indicates to a certain extent that the company may be undervalued.
Figure 10: Comparison of Yoshioka Precision Comparable Company Method Valuations (data as of January 14, 2022) Source: wind, 36Kr collation