Xiaomi SU7 was successfully launched, and the market size of new energy vehicles is expected to exceed 1 trillion in 2025.
The development and prosperity of an industry often drives the business of the entire industrial chain. The growing popularity of new energy vehicles has led to a surge in demand for upstream components. Feilong shares, DunAn Environment, Aotejia and Yinlun shares have laid out the auto parts industry. However, Sanhua Intelligent Control has occupied the vast majority of the market in the new energy auto parts industry.
Sanhua Intelligent Control is the world's largest manufacturer of refrigeration control components and the world's leading manufacturer of automotive thermal management system control components, accounting for 59.63% and 40.37% of its main business revenue respectively.
However, Sanhua's excellence is more than that!
In terms of profitability: In the past five years, Sanhua Intelligent Control's return on net assets has exceeded 15%, and its ROE performance is excellent.
In terms of peer comparison, in the past five years, the ROE performance of Sanhua Intelligent Control has continued to be stronger than that of Yinlun Shares, Tuopu Group, Aotejia and Feilong Shares, and the ROE of DunAn Environment has a large range of changes and unstable profits.
In 2023, Sanhua's ROE will reach 18.82%, surpassing DunAn Environment in one fell swoop. From the perspective of stability and high yield, Sanhua has the strongest profitability.
Excellent ROE is naturally inseparable from the increase in gross profit margin. Sanhua's gross profit margin has ranked first in the industry in the past five years, and the gross profit margin in 2023 will be as high as 27.89%, and the products have strong market competitiveness.
Next, let's take a look at the performance of Sanhua Intelligent Control?
In the past five years, Sanhua's operating income has continued to rise, with an operating income of 24.5 billion yuan in 2023, a year-on-year increase of 15%, and a three-year average growth rate of 25%, much higher than the industry average growth rate of -8%.
From 2019 to 2023, the company will create a net profit of more than 10 billion, and its performance is eye-catching!
Cash flow is critical, and once a company has made money now, it needs to start thinking about the future, and the cash flow position reflects its sustainability issues.
First, the absolute amount of cash and the quality of cash are analyzed.
The data in the chart below shows that the company's monetary capital stock has been positive from 2019 to 2023, and its cash flow has increased by 300% in 5 years.
Looking at the quality of its cash flow, we use the net present ratio. Net Present Ratio = (Net Cash Flow from Operating Activities/Net Profit) * 100%, the Company's Net Present Ratio has been above 90% in the past 5 years, and the Net Present Ratio will exceed 100% again in 2023, and the cash flow quality will surpass Moutai!
This shows that the company not only recovered all the current revenues in cash, but also recovered the previous accounts receivable, which reduced the company's financial risk to a certain extent and enhanced the sustainability of profitability.
Starting from the cash flow statement, further analyze the ins and outs of its cash flow to see if the company has potential risks in the future.
Looking at the cash inflow and outflow of Sanhua Intelligent Control in the past five years, the company's net cash flow from operating activities was positive, net cash flow from investment activities was negative, and net cash flow from financing activities was negative.
This shows that the company is more dependent on operating activities, and needs more cash flow in investment, and if the company does not operate well or the return on investment does not meet expectations in the future, there may be a shortage of cash flow.
So the point is, is it possible for Sanhua Intelligent Control to operate and invest poorly in the future?
The company is the world's largest supplier of air-conditioning parts, with the largest market share of air-conditioning parts, and its business volume is also growing at a steady rate every year.
The data shows that the demand for China's air conditioning market will pick up in 2024, and the market size is expected to increase slowly, with giants such as Midea, Gree, Haier, and Hisense occupying more than 40% of the domestic air conditioning market, with a high degree of market concentration, which means that cutting into the giant industry chain can better guarantee sales.
As of 2023, there are more than 20 leading customers in the air-conditioning and refrigeration sector, such as Midea, Gree, Haier, Hisense, LG, Samsung, TCL, etc., and the air-conditioning parts business is quite mature, which can bring stable and sustainable cash flow to the enterprise.
In 2023, the revenue of the automotive sector will account for 60%, and the operating income will reach 9.9 billion yuan, a year-on-year increase of 34%, becoming the second largest main business after air conditioning parts.
At present, traditional gasoline vehicles are increasingly unable to meet people's desire for a low-carbon life, and the popularity of new energy vehicles has become a trend. According to the data, the scale of China's new energy vehicle market has increased year by year from 2017 to 2023, and the market size of new energy vehicles in 2023 will be 1.15 trillion yuan, a year-on-year increase of 16.2%. It is expected that the market size will reach 2.31 trillion yuan in 2025, and there is still a lot of room for growth.
Of course, it cannot be ignored that the year-on-year growth rate of the new energy vehicle market has slowed down.
The main reason is that the competition in the industry has intensified, and the new energy automobile industry has gradually moved from the policy market to the market, and the market is more interested in the technological upgrading of new energy vehicles, which is a very important sector is the innovation and upgrading of the automotive thermal management system.
As a leader in automotive thermal management, Sanhua Intelligent Control is expected to receive more dividends in the context of the continuous rise in the scale of the thermal management market.
Some people may ask whether Tuopu Group, Yinlun Co., Ltd., and Aotejia are all laying out the automotive thermal management business, will it affect the operation of Sanhua?
In fact, there is no need to worry about this, although they are all in the layout of the automotive thermal management business, but the product focus is different, and it will not form a direct competition situation.
Next, pay attention to its investment side: Sanhua's current most concerned investment is the 4 billion construction robot electromechanical actuator and domain controller project. At present, the negative cash flow of investment income is mostly caused by the early investment in the robot project.
But don't worry, Sanhua has an advantage in starting a robot business.
In terms of customers, the company has cut into Tesla and other production lines before, and the customer network is huge, making it easier to form cooperation intentions with domestic and foreign customers in robotics.
At the technical level, the humanoid robot actuator is similar to the core process of the company's electronic pump products, including stamping, injection molding, machining, welding, surface treatment, motor winding, PCBA patch, assembly and other processes.
In terms of industrial cooperation, Sanhua Intelligent Control and Suzhou Green Harmonic Transmission Technology Co., Ltd. have signed a strategic cooperation framework agreement, and the two parties will jointly invest in the establishment of a joint venture in Sanhua Mexico Industrial Park to strengthen cooperation in the robot industry chain.
From the above analysis, it can be seen that there is no need to worry about the current negative net investment cash flow of Sanhua Intelligent Control, the robot industry is in line with market expectations and the company's current situation of the right investment, and it is expected that it may become Sanhua's second growth curve in the future.
Finally, let's summarize.
Sanhua Intelligent Control has shown the characteristics of a mature enterprise in terms of profitability and performance, with cash flow growth reaching expectations and actively exploring emerging businesses, and the status of A-share "White Horse" is well deserved! This also attracted 220 institutions to rush to raise funds (Q1 2024 report).
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