Ping An Securities: Gave Weichai Power an overweight rating

2022-04-01Ping An Securities Co., Ltd. Wang De'an, Wang Andhai conducted a study on Weichai Power and released a research report "Engine Share Increase, Intelligent Logistics Recovery", this report gives An overweight rating to Weichai Power, and the current stock price is 13.3 yuan.

Weichai Power(000338)

Matters:

The company released its 2021 annual report, achieving operating income of 203.5 billion yuan (+3%) in 2021, net profit attributable to the mother being flat at 9.3 billion yuan year-on-year, and net profit attributable to the mother after deducting non-deductions of 8.3 billion yuan (-5%). The dividend plan is RMB1.85 (including tax) for every 10 shares, and the share capital will not be converted into a provident fund.

Ping An View:

Increased share of engines and transmissions. In 2021, the heavy-duty truck industry will sell 1.395 million units (-13.8%), and the construction machinery industry will sell 1.014 million units (+10.4%). In 2021, Weichai engines sold 1.02 million units (+3%), of which 429,000 units were sold for heavy-duty truck engines, an increase of 2.8 percentage points to 30.7%. Sales of transmissions were 1.153 million units, of which 1.01 million units were heavy-duty transmissions, up 5.3 percentage points year-on-year to 72.4%. High-end products continue to exert efforts, with large bore engine revenue of 1.4 billion (+49%), and high-end hydraulic domestic revenue of 560 million (+12%). Engine external revenue increased by 10% year-on-year to 52.3 billion, and the net profit margin of the engine business decreased by 2.1 percentage points year-on-year to 11.5%. Transmission company Fast generated revenue of $16.9 billion (-6.3%), net profit margin also fell to 6.9% year-on-year, and achieved a net profit of 1.17 billion. Shaanxi Heavy Duty Truck's share declined, achieving sales of 150,000 units in 2021, with a loss of 540 million yuan in the current period.

Smart logistics ushered in a strong recovery. KION, the world's leading supplier in the field of intralogistics, achieved a strong recovery in 2021, achieving revenue of 10.3 billion euros (+23.4%) and net profit of 570 million euros, an increase of 1.7 times year-on-year, the best in history. In December 2021, the first phase of KION's China forklift project and the start of the Dematic project in the United States will help the company's intelligent logistics business expand the Asia-Pacific market, especially the Chinese market.

R&D spending increased. In terms of expenses, due to the decline in industry growth, the scale effect declined in the second half of 2021, and the expense ratio increased. In 2021, R&D investment increased by 3.3% year-on-year to 8.6 billion, of which the capitalization rate increased by 3.48 percentage points year-on-year to 11.5%, and the R&D expense ratio in 2021 was 3.38%, an increase of 0.33 percentage points year-on-year.

Rapid layout of hydrogen fuel cells. The company comprehensively laid out the three major assembly platforms of fuel cell, hybrid and pure electric, developed a full range of fuel cell product platforms of 30-200kW and realized mass production and release. Strategic cooperation with Swiss Flying Group, committed to providing high-performance, high-quality, cost-effective fuel cell air compressor product solutions for global customers; actively participate in the promotion of "hydrogen into ten thousand homes" science and technology demonstration project, hydrogen fuel cell buses have accumulated more than 15 million kilometers of operation; hydrogen fuel cell heavy trucks have realized multi-scenario applications.

Looking forward to the future, Weichai's supporting share in the field of light and heavy trucks will also increase. It is expected that the market share of heavy-duty truck engines will increase from the current 30% to more than 40%, and the share of light truck engines will be increased to more than 40%. Weichai has a more obvious advantage than ever in the core powertrain field of commercial vehicles. After the non-road upgrade of China IV at the end of 2022, the company will usher in more room for growth. The multi-business synergy effect is remarkable: 1) the supporting equipment for the heavy trucks and light trucks of Sinotruk Group has been significantly improved, and the cooperation with Lovol Heavy Industries has been strengthened; 2) the large bore engine and hydraulic powertrain will gradually exert higher value, and Weichai has broken through the core technologies of the three major powertrains of commercial vehicles, construction machinery and agricultural equipment, and has a strong system matching advantage.

Earnings Forecast and Investment Advice: Sales in the heavy-duty truck industry are expected to decline to around 1 million units in 2022, a decline of 28%. Weichai's engine market share is expected to rise sharply, mainly due to the increase in the proportion of Sinotruk, and the scale effect of the engine leader under the background of emission upgrade is more prominent. In addition, due to the recovery of KION in Germany, the company is expected to outperform the industry. Based on the latest situation, we adjusted the company's performance forecast to expect net profit attributable to the parent company in 2022/2023 to be 7.7/10.2 billion (the original forecast was 11.3/12.4 billion), respectively, and for the first time to give a net profit forecast of 11.2 billion in 2024. The company has a solid position in the core parts of the truck industry chain such as engines and gearboxes, and combined with profit forecasts and current valuation levels, we maintain the company's "recommended" rating.

Risk Warning: 1) The decline in the heavy-duty truck industry exceeded expectations; 2) The price of upstream raw materials increased: If the price of upstream raw materials increased, it will have a certain impact on the company's cost and profitability; 3) The popularity of new energy technology is not as expected, and the company invests a lot of resources in the field of new energy, but it is limited by the technology and products that are not mature enough, if the promotion of fuel cell engines is not as expected, it may have a negative impact on future performance.

According to the research report data released by Securities Star Data Center in the past three years, the team of researcher Zhang Jueyin of Dongxing Securities has studied the stock more deeply, and the average forecast accuracy in the past three years is as high as 97.06%, and its forecast for the net profit attributable to 2022 is 10.353 billion yuan, and the forecast PE is 10.18 according to the current price conversion.

The latest profit forecast breakdown is as follows:

A total of 5 institutions have given ratings, 3 buy ratings and 2 overweight ratings in the last 90 days; the average target price of institutions in the past 90 days has been 22.57. According to the Valuation Analysis Tool of Securities Star, Weichai Power (000338) has a good company rating of 3.5 stars, a good price rating of 3.5 stars, and a comprehensive valuation rating of 3.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)

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