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Risk reminder: The expansion of production does not meet expectations, the price of lithium hexafluorophosphate fluctuates significantly, and downstream demand shrinks

Xinwangda: Battery demand continues to be optimistic

Conclusion and suggestions:

As a leading company in the domestic consumer electronics battery pack industry, the company has achieved a compound increase rate of 43% and 48% in revenue and net profit over the past seven years. In the future, driven by the increase in single machine capacity and fast charging demand, the demand for batteries in the smart machine field continues to rise. In addition, in the power lithium battery business field, the company faces huge opportunities and is expected to have an average annual growth rate of over 100% in the next two years. Therefore, the company's performance is expected to continue to rise.

We expect to achieve net profits of 490 million yuan and 690 million yuan from 2016 to 2017, with YoY increasing by 49% and 42%, EPS of 0.75 yuan and 1.06 yuan, corresponding to PE of 35 times and 24 times, respectively. The valuation is relatively low compared to the company's performance growth, so we provide investment suggestions for "buying".

The explosive growth of power lithium battery business: The company has entered the field of power lithium batteries since 2011. Through years of accumulation, the company has gradually entered domestic vehicle companies such as Chery, Beiqi Foton, Wuling, Dongfeng, GAC, Wuzhoulong, and Geely since last year. Among them, Wuzhoulong orders 20000 logistics vehicles this year, which is expected to bring in incremental revenue of over 500 million yuan. In the long run, compared to the market size of consumer electronic batteries of 80 billion yuan, The future market space for power lithium batteries will exceed 100 billion yuan. As one of the most automated PACK companies in China, the company has a natural advantage in battery performance consistency, which is bound to benefit from the industry's spring breeze. It is expected that the growth rate of this business's revenue is expected to double in the next two years.

The upgrading of demand for consumer electronic batteries has driven the company's ASP to continue to rise: After more than a decade of development, smart devices have significantly improved their computing power and portability, but their battery life has declined. Therefore, device manufacturers can only increase battery capacity and adopt fast charging methods to seize user pain points. We expect that in terms of single machine capacity, the growth rate of single machine capacity is expected to reach 10% in the future. In addition, the penetration rate of fast charging is expected to increase from 15% currently to 50% in 2017. Therefore, we believe that the ASP of smart device batteries will continue to rise, and the company's customer structure will continue to be optimized. These factors will drive the company's phone and laptop battery revenue to increase by more than 30% annually.

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