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Time: January 10, 2020 06:00:56 Zhongcai
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Quick review of major events of China Automotive Research (601965): Q4 2019 revenues and profits hit new highs on the market <br /> Category: Company organization: Guoxin Securities Co., Ltd. Researcher: Liang Chao / He Junyi Date: 2020-01-09 Matters:
China Automobile Research and Development Cloth's 2019 performance report: The company realized revenue of 2.75 billion yuan, -0.14% year-on-year; the net profit attributable to shareholders of listed companies was 466 million yuan, + 15.49% year-on-year, and earnings per share were 0.48 yuan.

Guoxin Auto's view: The company's performance is in line with expectations, and Q4's revenue and profits achieved rapid growth year-on-year (revenue of 1.07 billion yuan, + 42%, net profit of 179 million yuan, + 23%), and the revenue slightly declined, mainly due to the industrialization sector. The special vehicle assembly and sales business, which accounted for a relatively large proportion of revenue, declined year-on-year, dragging down overall revenue, while net profit achieved steady growth, mainly due to technical services to increase customer development efforts (especially relying on the four major indexes), new contracts and operations Revenue growth. We believe that:
1. As a scarce target of listed automotive technology service companies, the company has ushered in new development opportunities in the transformation and upgrading of automotive electrics and intelligence. The technical service sector relies on the "Four Major Indexes" and intelligent networking, and its market influence has increased significantly. Customers gradually upgrade from autonomous to joint venture brands; 2. The company recently re-implemented the equity incentive plan to demonstrate the company's long-term development confidence, and this time, the scope and breadth were significantly increased, the incentive mechanism was improved, and the company's enthusiasm was improved; 3. Listed company holding Shareholders General Technology Group regards advanced manufacturing and technical service consulting areas as key development areas to provide strong support for automotive research to expand and strengthen automotive technical services; 4. The company's current valuation is low, with a strong margin of safety, and the company's development is welcome Come to new opportunities and open up new spaces. We estimate the company's net profit in 2020 to be RMB 540 million (corresponding to PE15X), and maintain the "Buy" rating.

comment:
Under the background of the industry downturn, the main revenues of companies operating stably are technical services and industrialization (technical services of 1.80 billion in H1 revenue in 2019 and 470 million yuan). The company's technical service sector is directly related to the listing of listed new models and industry openness experiments. R & D investment is indirectly related to the prosperity of the automotive industry. Against the backdrop of slump in automobile sales, the company maintained steady growth in profits, reflecting the gradual improvement of the company's operating and management efficiency. Looking forward to 2020, the growth rate of automobile production and sales will decline and narrow, and the industry's prosperity is in the midst of a weak recovery. Considering the significant increase in the company's fixed assets (2.61 billion yuan of fixed-value assets at the end of 2019, a significant increase from 2018's 1.70 billion yuan), The construction project has been reduced. With the successive use of the wind laboratory and the intelligent network connection experimental base, new performance growth points have been brought.

Automotive intelligent network connection under 5G ushers in new development With the advancement of commercialization of 5G, automotive electric intelligent network connection is expected to usher in accelerated development opportunities. Auto Research won the bid of the Ministry of Industry and Information Technology Intelligent Vehicle and Intelligent Transportation Demonstration Key Project in 2016 to create Xiantao Data Valley's first 5G autonomous driving platform in China to strengthen the intelligent network connectivity testing business; in 2019, we will undertake the National Intelligent Network Joint Test Company to set up a joint research center for automotive big data applications, and the vehicle networking security jointly established with the National Computer Network Emergency Technology Processing Coordination Center Joint laboratory; the wholly-owned intelligent networked automobile test base (Dazu base) was completed. Gradually improve the industrial chain based on 5G applications for intelligent connected car detection, operation detection control, network security, and big data applications, and usher in new development opportunities.

Master the core technology of smart detection and maintain the "Buy" rating. In the short term, the company's fundamentals are weakly related to the automotive incremental market and defensive. At the same time, the company benefits from the upgrade of emissions and the launch of a new business wind tunnel laboratory.

In the long run, the company belongs to the automotive industry leader in core technology. It has a forward-looking layout of intelligent network connection and improved management. It is expected to usher in stable performance growth and increased valuation. We maintain the company's net profit attributable to the parent for 19/20/21 respectively of RMB 4.62 / 5.37 / 6.09 billion and EPS of RMB 0.48 / 0.55 / 0.63 respectively. The current stock price corresponds to PE of 17.6 / 15.2 / 13.4x respectively. Maintain reasonable valuation RMB8.64-9.60 (corresponding to 19-year PE18-20x), maintain "Buy" rating.

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