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Yu Bing Zhongyuan Securities
Key investment points:
The decline in production and sales of Hafei Automobile and Changhe Automobile, the company's main customers Dong'an Power In the first half of the year, the main business income declined. In the first half of the year, the average price and gross profit margin of the products recovered, but the profitability of the headquarters was still at a low level.
The engine sales of Harbin Dong'an Auto Engine Manufacturing Co., Ltd., in which the company has a 36% stake, nearly doubled over the same period, and the investment income recognized by the company increased significantly and became the main source of profits.
Cash flow from operating activities declined significantly. Some of the company's complete vehicle production customers are facing greater operating pressure, occupying the funds of upstream engine manufacturers. The turnover rate of accounts receivable also decreased from 2.28 in the same period last year to 1.25 in the current period.
The company's interim report has been audited, and the relevant provision is relatively strict. In the first half of the year, 32.19 million yuan of asset impairment losses were accrued, mainly for bad debt losses. We judge that this provision is likely to be reversed.
The implementation of the rights issue project will improve the emission standards and power raising level of existing engine products and strengthen the market competitive power 。 The investment scale of the project is reasonable, and we are optimistic about the market prospects and investment benefits of the rights issue project.
It is estimated that the company's earnings per share in 2007 and 2008 will be about 0.44 yuan and 0.56 yuan respectively. According to the pricing level of 30 times of P/E ratio, the reasonable price of the company is about 15 yuan, and the investment proposal of "increasing shareholding" is given.
Risk tip: The business of the company's headquarters is greatly affected by the production and sales of Hafei Automobile, Changhe Automobile and other major customers; At present, the company's profit mainly depends on investment income.
Special note: AVIC, the controlling shareholder of the company, has a large number of automobile and parts enterprises, and the internal integration potential of the group is great.
Dong'an Power disclosed the audited 2007 interim report on July 7: during the reporting period, it realized sales revenue of 1087.22 million yuan, down 6.54% year on year; The net profit was 96.83 million yuan, up 32.75% year on year. Earnings per share is 0.2096 yuan, net assets per share is 3.65 yuan, and the return on net assets is 5.75%.
1. Main business is restricted by poor sales of micro car enterprises
Dong'an Power's main product is mini car engine, which is mainly used for mini car manufacturers such as Hafei Automobile and Changhe Automobile. In the first half of this year, the sales of minibus market grew slowly, especially for the models below 1 liter. According to the statistics of the China Automobile Association, the sales of mini cars with a capacity of less than 1 liter fell by 27% from January to May, and the sales of mini buses fell by 17%.
The poor performance of the mini bus market is mainly due to the fact that the technical level, safety and comfort performance of this type of products have not been improved for many years. In the early stage, when consumers did not have high requirements for safety and comfort, this kind of products occupied the market with a lower price. However, with the improvement of consumer demand, the existing microbus products could not meet the use requirements of car buyers. At the same time, economic cars also occupied part of the market of microbus with a good cost performance ratio. We believe that the development opportunities of minibus products depend on their own technical level, especially the improvement of engine performance.
The production and sales of Hafei Automobile and Changhe Automobile, the main customers of the company, declined. The main business income of Dong'an Power dropped in the first half of the year due to the poor operating conditions of major customers: the company sold 150585 mini car engines in the first half of the year, down 3.79% year on year; The sales revenue was 1087.22 million yuan, down 6.54% year on year.
2. Profit growth comes from investment income contribution
From the perspective of profit composition of Dong'an Power, the company's main business is basically unprofitable. The weak profitability of its main business stems from the low level of gross profit margin; At the same time, the company's period expense rate is on the high side. The gross profit rate of the company has declined in recent years. In the first half of 2007, both the average price of products and the gross profit rate have rebounded, but the profitability of the headquarters is still at a low level.
The sales of 4G1 and 4G9 series engines of Harbin Dong'an Automobile Engine Manufacturing Co., Ltd. (Dong'an Mitsubishi), in which the company has a 36% stake, nearly doubled over the same period, and the investment income recognized by the company increased significantly. The company's products are mainly 1.6L and 1.8L, and the displacement is well adapted to the current demand of household car consumption. At the same time, the company's products are produced by introducing the technology of Mitsubishi Corporation of Japan, with good performance and stable quality, and become the first choice of engines for many small and medium-sized automobile manufacturers. Statistics show that Dongan Mitsubishi sold 117699 engines in the first five months of this year, up 107.64% year on year. The company has strong profitability, with the net profit rate and return on equity of 15.99% and 27.22% respectively in the first half of 2007. With the contribution of Dongan Mitsubishi, Dongan Power realized a net profit of 96.83 million yuan in the first half of the year, up 32.75% year on year.
3. Decrease in cash flow from operating activities
In the first half of the year, the company's cash flow from operating activities was RMB - 404 million. Specifically, the cash received from selling goods in the first half of the year decreased significantly, which was the direct reason for the decrease of cash flow from operating activities. We judge that some complete vehicle production customers of the company may face greater operating pressure and difficult capital turnover, thus occupying the capital of upstream engine manufacturers. In addition, the turnover rate of accounts receivable also decreased from 2.28 in the same period last year to 1.25 in the current period.
The company's interim report has been audited, and the relevant provision is relatively strict. In the first half of the year, 32.19 million yuan of asset impairment losses were accrued, mainly for bad debt losses. We judge that this provision is likely to be reversed.
4. Share allotment project to improve product technology
The Company plans to implement the share allotment plan, and the specific plan is as follows:
Allotment ratio: 10:3 to all shareholders; Number of shares issued: 138.624 million; Allotment price: take the average price of the company's A-shares 20 trading days before the issuance announcement as the base, and use the market price discount method to determine the allotment price.
Investment projects with raised funds: 1. Independent research and development of DA468QL1/471QL engine platform upgrading and production line technical transformation project, with a planned investment of 356.68 million yuan. 2. Independent research and development of DA6 engine and production line technical transformation project, with a total investment of 800 million yuan.
Project 1 is the upgrading of the existing engine platform and the technical transformation of the production line. The emission level after upgrading will reach Euro V emission standard, and the power rise will reach 50kw. This power level will meet the standard requirements for energy-saving and environment-friendly small displacement vehicles and their advanced engines (gasoline engine power rise is more than 50KW, diesel oil The lifting power is greater than 40KW), so as to obtain policy encouragement and support. The implementation of this project will improve the emission standards and power upgrading level of existing engine products and enhance market competitiveness. At the same time, the investment scale of the project is appropriate, so we are optimistic about the market prospect and investment benefits of the project.
Project 2 is a newly developed engine product with a large investment scale (800 million yuan). We are cautious about this project.
It is worth noting that the construction period of the above two projects is relatively long, and the production period is around 2012. Due to the rapid progress of engine technology at present, the project investment period is long, which may lead to the risk that the technical level of relevant products will lag behind after the launch.
5. Profit forecast
6. Investment Suggestions
The main products of the company are small displacement engines, which are mainly supported by mini car manufacturers. Affected by the poor production and marketing of downstream enterprises, the profitability of the company's main business has declined. The investment income contributed by Harbin Dong'an Automobile Engine Manufacturing Company (Dong'an Mitsubishi), a joint venture of the company, has become the main source of the company's profits. Dongan Mitsubishi products have good performance and strong market competitiveness. It is expected that the performance of Dong'an Power will keep rising in the later period, driven by the rapid growth of investment income. In addition, the construction project of raising funds through rights issue will improve the emission standard and power raising level of the engine products of the headquarters, reduce the dependence on investment income, and thus form a good situation in which the main business and investment income are jointly promoted.
It is estimated that the company's earnings per share in 2007 and 2008 will be about 0.44 yuan and 0.56 yuan respectively. According to the pricing level of 30 times of P/E ratio, the reasonable price of the company is about 15 yuan, and the investment proposal of "increasing shareholding" is given. Risk tip: The business of the company's headquarters is greatly affected by the production and sales of Hafei Automobile, Changhe Automobile and other major customers; At present, the company's profit mainly depends on investment income.
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
