According to data from the China Association of Automobile Manufacturers, the production and sales of automobiles in China reached 27.021 million and 26.864 million respectively in 2022, an increase of 3.4% and 2.1% year-on-year. Among them, new energy vehicles continued to experience explosive growth, with production and sales reaching 7.058 million and 6.887 million respectively, a year-on-year increase of 96.9% and 93.4%, and a market share of 25.6%, 12.1 percentage points higher than the previous year.
New energy vehicles will continue to experience explosive growth in 2022 and gradually enter a period of comprehensive market-oriented expansion. New energy vehicles are selling well, and with the current transformation of the automotive industry towards intelligence and electrification, companies related to the automotive supply chain are also experiencing positive results. In this context, as an important part of the automotive industry chain, automotive parts companies are applying for A-share listing in 2022.
According to incomplete statistics, in 2022, Ningbo Minda Automotive Technology Co., Ltd. (hereinafter referred to as "Minda Group"), Zhejiang Huayuan Automotive Technology Co., Ltd. (hereinafter referred to as "Zhejiang Huayuan"), Zhejiang Yahoo Automotive Parts Co., Ltd. (hereinafter referred to as "Zhejiang Yahoo"), and Suzhou Zhongjie Automotive Parts Co., Ltd. (hereinafter referred to as "Zhongjie Automobile") More than ten companies, including Wuhan Yuanfeng Automotive Electronic Control System Co., Ltd. (hereinafter referred to as "Yuanfeng Electric Control"), Shanghai Automotive Air Conditioning Parts Co., Ltd. (hereinafter referred to as "Shanghai Auto Parts"), and Rizhao Xingye Auto Parts Co., Ltd. (hereinafter referred to as "Xingye Auto Parts"), have applied for A-share listing.
Hebei Keli Automobile Equipment Co., Ltd. and Zhejiang Siling Automobile Bearing Co., Ltd. have successfully held meetings on January 12 of this year and September 16, 2022, respectively; Changshu Tongrun Automotive Parts Co., Ltd. was successfully listed on the Shanghai Stock Exchange in July 2022, and Chuzhou Duoli Automotive Technology Co., Ltd. also received IPO approval recently. It will be listed on the main board of the Shenzhen Stock Exchange and plans to raise 1.592 billion yuan.
At present, the scale of automotive parts enterprises varies, and the scale of planned listed companies is generally relatively small. Minda Group, Zhejiang Huayuan, Zhejiang Yahoo, Zhongjie Automobile, Yuanfeng Electric Control, Shanghai Auto Parts, and Xingye Auto Parts plan to raise 548 million yuan, 314 million yuan, 363 million yuan, 421 million yuan, 406 million yuan, 839 million yuan, and 1.47 billion yuan respectively, with valuations of 2.192 billion yuan, 1.57 billion yuan, 1.452 billion yuan, 1.688 billion yuan, 1.624 billion yuan, 3.356 billion yuan, and 5.88 billion yuan.
Among the listed automotive parts companies, Fuyao Glass (600660. SH), which focuses on automotive glass production, has a market value of over 100 billion yuan, with a total market value of 100.632 billion yuan; The total market value of automotive electronics company Desai Xiwei (002920. SZ) and comprehensive automotive parts listed company Huayu Automobile (600741. SH) have also reached 71.125 billion yuan and 57.38 billion yuan, respectively, with a stable leading position.
Wide range, with a wide variety of automotive component products
Automotive components usually refer to all parts and components except for the car frame. Cars are generally composed of four basic parts: engine, chassis, body, and electrical equipment. Therefore, various sub products of automotive components are derived from these four basic parts. According to the nature of the components, they can be classified into engine systems, power systems, transmission systems, suspension systems, braking systems, electrical systems, and others.
The coverage of automotive components is wide, and there are also many types of products. In the automotive parts industry that applies for listing, each company's business and product types are also different. Specifically, Minda Group submitted its prospectus for the first time in June 2022 and resubmitted it on January 20th this year. It plans to sprint to the main board of the Shanghai Stock Exchange for listing, with a planned fundraising of approximately 548 million yuan. According to the prospectus of Minda Group, the company specializes in the sub field of fasteners required for automotive manufacturing. The company's products are mainly used for connecting and fastening key components such as engines, transmissions, chassis systems, oil and water circuits, wheel hubs, new energy vehicle battery packs, and motors in automobiles. Minda Group's product sales are mainly domestic, with overseas sales revenue accounting for less than 3%. From 2019 to 2021, Minda Group achieved operating income of 875 million yuan, 828 million yuan, and 959 million yuan, respectively; The net profits attributable to the shareholders of the parent company were 128 million yuan, 114 million yuan, and 113 million yuan, respectively.
Zhejiang Yahoo plans to sprint for an IPO on the Growth Enterprise Market. The company is mainly engaged in the research and development, production, and sales of automotive seat frame assemblies and components. Its main products include automotive seat frame assemblies and sub assemblies, stamping parts, molds, etc. The total investment amount for this proposed investment project is approximately 363 million yuan, with a planned fundraising of approximately 331 million yuan. The main fundraising projects include the expansion of automotive seat frame assemblies and core components, research and development center and information technology transformation projects, and supplementary working capital. According to the prospectus, from 2019 to the first half of 2022, Yahoo Inc. achieved operating revenue of RMB 500 million, RMB 534 million, RMB 730 million, and RMB 268 million, respectively; The net profit attributable to the parent company was 48.3543 million yuan, 52.1157 million yuan, 61.715 million yuan, and 19.08032 million yuan, respectively.
The main business of Shanghai Auto Parts is the research and development, production, and sales of automotive components such as air conditioning pipelines and fuel distribution pipes. In 2022, the company submitted its second prospectus to the Shanghai Stock Exchange Main Board, but its performance did not improve but declined. The prospectus shows that from 2019 to 2021, the operating revenue of Shanghai Auto Parts was 1.337 billion yuan, 1.188 billion yuan, and 1.391 billion yuan, respectively, with a year-on-year decrease of 11.12% in revenue in 2020; The net profit attributable to the parent company after deducting non recurring expenses during the same period was 105 million yuan, 112 million yuan, and 85.4123 million yuan, respectively, with a year-on-year decrease of 24.11% in 2021.
Zoje Automobile is mainly engaged in the research and development, production, and sales of precision machined components for automotive thermal management systems. Its main products include automotive air conditioning heat exchangers and piping systems, oil coolers, heat pump systems, battery coolers, automotive engine systems, and other automotive components. Among them, the revenue from automotive thermal management system components accounts for over 90%, making it the company's main source of revenue. From 2019 to the first half of 2022, Zhongjie Automobile's operating revenue was approximately 364 million yuan, 443 million yuan, 593 million yuan, and 344 million yuan, respectively. The corresponding net profit attributable to the parent company was 50.6027 million yuan, 47.6293 million yuan, 48.6779 million yuan, and 38.0134 million yuan, with some fluctuations.
Zhejiang Huayuan focuses on the research and development, production, and sales of customized automotive system connectors. Its main products are special-shaped fasteners and seat locks, which are widely used in automotive body chassis and power systems, automotive safety systems, automotive intelligent electronic systems, automotive interior and exterior decoration systems, etc. From 2019 to the first half of 2022, the company's operating revenue was 274 million yuan, 346 million yuan, 454 million yuan, and 204 million yuan, respectively; The net profit attributable to the parent company was 30.1873 million yuan, 47.8015 million yuan, 200 million yuan, and 25.84 million yuan, respectively; The gross profit margin of the main business was 35.69%, 35.56%, 32.47%, and 29.89%, respectively, and continued to decline.
Core financial indicators data of IPO companies in the automotive parts industry
(Data source: Wind)
"Beside large households", some enterprises rely on profits for survival
The customer base of the automotive parts industry is mainly automotive manufacturers. Auto parts companies such as Xingye Auto Parts, Zhejiang Yahoo, Zoje Automobile, Shanghai Auto Parts, and Zhejiang Huayuan all rely on large customers.
Specifically, Xingye Auto Parts specializes in the research and development, production, and sales of truck frames and body components, with its main customers being domestic truck manufacturers. From 2018 to 2021, the operating revenue of Xingye Auto Parts was 1.351 billion yuan, 1.439 billion yuan, 2.335 billion yuan, and 2.374 billion yuan, respectively. The net profit was 150 million yuan, 146 million yuan, 215 million yuan, and 163 million yuan, with net profit growth rates of -2.97%, 47.06%, and -24.24%, respectively. While the net profit fluctuates, Xingye Auto Parts has a significant dependence on the top five customers. According to the prospectus, from 2018 to 2021, the sales proportion of Xingye Auto Parts to the top five customers was 93.37%, 87.63%, 85.46%, and 85.82%, respectively. Among them, the largest customer of Xingye Auto Parts was China National Heavy Duty Truck Group, and over 50% of its operating income during the reporting period came from China National Heavy Duty Truck Group.
Coincidentally, Zhejiang Yahoo's sales revenue to its top five customers also accounts for a relatively high proportion. From 2019 to the first half of 2022, the sales revenue of Zhejiang Yahoo's top five customers accounted for 88.16%, 87.95%, 86.20%, and 80.80% of the current operating revenue, respectively, indicating a high concentration of customers. In the first half of 2022, the top five customers of Zhejiang Yahoo were FAW Fuwei Andaotuo Metal, Chongqing Andaotuo, FAW Fuwei, Yingtier Transportation, and FAW Fusheng Li'er. Among them, Zhejiang Yahoo's sales revenue to its largest customer accounted for 50.94%, 39.61%, 30.54%, and 30.52% of the current operating revenue, respectively. Although the proportion of sales to its largest customer has decreased, it is still at a relatively high level.
From 2019 to the first half of 2022, Zhejiang Huayuan's sales to its top five customers were 150 million yuan, 173 million yuan, 210 million yuan, and 101 million yuan, accounting for 57.09%, 52.22%, 47.83%, and 50.79% of its main business revenue, respectively.
From 2019 to 2021, the sales revenue of Shanghai Auto Parts to the top five customers accounted for 66.36%, 71.02%, and 64.11% of the operating revenue, respectively, and the customer concentration was also relatively high. The top five customers of the company include Volkswagen AG, United Automotive Electronics Co., Ltd., SAIC General Motors Co., Ltd., FAW Volkswagen Co., Ltd., SAIC Group, etc.
The top five customers of Shanghai Auto Parts
(Source: Shanghai Auto Parts prospectus)
Most automotive parts companies have a high concentration of customers, but while reducing the proportion of major customer sales, the company's gross profit margin is showing a downward trend. According to the prospectus data, from 2019 to 2021, the gross profit margin of Shanghai Auto Parts' main business was 21.88%, 21.64%, and 16.51%, respectively, decreasing year by year. However, Tenglong Group, with the same product type, had a gross profit margin of 34.42%, 29.59%, and 24.18% during the same period, which was higher than that of Shanghai Auto Parts.
From 2019 to 2021, Zhongjie Automobile's comprehensive gross profit margin was 28.23%, 23.54%, and 21.39%, respectively, showing a downward trend year by year, and lower than the average of comparable companies such as Yinlun Group, Sanhua Intelligent Control, Tenglong Group, Quanfeng Automobile, and Bond Group. The average for the same period was 31.06%, 28.78%, and 24.42%, respectively. The company explained that since 2020, its gross profit margin has declined due to the impact of the epidemic, transportation costs being transferred to cost accounting, exchange rate fluctuations, rising raw material prices, and rising shipping costs.
From 2019 to the first half of 2022, the gross profit margin of Minda Group's main business was 29.20%, 27.49%, 25.16%, and 21.83%, respectively; During the same period, the gross profit margin of Zhejiang Yahoo's main business was 26.93%, 26.38%, 21.79%, and 19.04%, respectively; All show a downward trend. Zhejiang Yahoo stated that the decrease in gross profit margin of its main business in the first half of 2022 and 2021 was mainly affected by the decrease in gross profit margin of single category products, while the impact of changes in revenue structure and single category gross profit margin in 2020 on the gross profit margin of its main business offset each other, and the gross profit margin of its main business remained relatively stable.
Zhang Xiang, Dean of the New Energy Vehicle Technology Research Institute at Jiangxi New Energy Technology Vocational College, told Investor Net that the dependence of automotive parts companies on major customers is a historical legacy issue. In the early stages of industry development, due to regional and other factors, "a tower near a water receives the moon first." Early automotive component suppliers mainly relied on nearby automotive companies, facilitating nearby supply, research and development communication, business exchanges, and so on. On the other hand, the issue of customer dependence also reflects that there are relatively few large component enterprises in China, and the scale of domestic automotive component companies is generally relatively small.
Zhang Xiang further pointed out that currently, the concentration of China's automotive parts industry is relatively low, and industry companies are "engaged in price wars". When opening up new customers, they often use low prices as a customer acquisition advantage, resulting in a decrease in the company's profit margin. The main reason for this is that there are more companies in the automotive parts industry but they are not large in scale, forming vicious competition, and insufficient investment in product research and development and technology, which creates a certain gap with foreign large enterprises.
From the perspective of R&D investment, in 2021, the R&D expenses of Xingye Auto Parts, Minda Group, Zhejiang Yahoo, Shanghai Auto Parts, Siling Group, Zoje Automobile, and Zhejiang Huayuan accounted for 2.31%, 2.98%, 3.54%, 3.91%, 4%, 4.43%, and 5.07% of the operating revenue, respectively, with a relatively low R&D expense ratio.
Research and development expense ratio of IPO companies in the automotive parts industry
(Data source: Wind data)
Specifically, according to the prospectus, from 2019 to the first half of 2022, the R&D expense ratio of Zoje Automobile was 4.82%, 4.58%, 4.43%, and 4.15%, respectively, showing a continuous downward trend. However, the average R&D expense ratio of comparable companies in 2019 was 5.39%, which increased to 5.74% in the first half of 2022, indicating an overall upward trend. Taking 2021 as an example, comparable companies such as Bond Group, Sanhua Intelligent Control, Tenglong Group, Quanfeng Automobile, and Songzhi Group have R&D expense ratios of 4.73%, 4.69%, 4.64%, 7.72%, and 6.14%, respectively, which are higher than Zoje Automobile.
Riding the wind, the automotive parts industry has broad prospects
At present, global automobile production bases are mainly concentrated in the Asia Pacific, Europe, and the Americas, presenting a multipolar market pattern. As the automotive consumer market in developed countries tends to saturate, the global automotive industry center is shifting from traditional markets represented by the United States, Europe, Japan and South Korea to emerging markets represented by China, Brazil, and India. From 2012 to 2021, China's proportion of global automobile production increased from 22.9% to 32.54%.
The automobile industry is a pillar industry of China's national economy, among which new energy vehicles have become a new growth engine in the industry. According to data from the China Association of Automobile Manufacturers, the sales of new energy vehicles in China have increased rapidly from 507000 in 2016 to 6.887 million in 2022.
The automotive parts industry provides corresponding component products for the downstream automotive manufacturing industry, which is an important link in the automotive industry chain. According to data from the National Bureau of Statistics, from 2012 to 2021, the proportion of the output value of China's automotive parts manufacturing industry to the total output value of the automotive industry remained basically above 40%.
At the same time, the import and export amount of automotive parts in China is showing an increasing trend. In 2021, the import value of China's automotive spare parts reached 37.644 billion US dollars, a year-on-year increase of 15.9%; The export amount was 75.568 billion US dollars, a year-on-year increase of 33.7%.
In recent years, the scale of China's automotive parts industry has grown rapidly, with a market size exceeding 4 trillion yuan in 2021. According to data from the National Bureau of Statistics, the main business revenue of the automotive parts industry increased from 1.98 trillion yuan in 2011 to 3.88 trillion yuan in 2017, with an average compound annual growth rate of 11.89%.
Since 2018, China's automotive industry has entered a development platform period, with the overall production and sales scale declining compared to 2017. In 2019, China's automotive parts industry has entered an upward trend again. In 2021, the revenue scale of the enterprise was 4066.8 billion yuan, a year-on-year increase of 12%.
(Data source: National Bureau of Statistics)
As the Chinese automotive parts market enters a stage of large-scale development, the number of automotive parts enterprises is increasing. According to data from Qichacha, there were over 100000 registered automotive parts related enterprises from 2020 to 2021. In 2021, there were 165000 registered automotive parts related enterprises, a year-on-year increase of 64.8%.
At the same time, investment and mergers and acquisitions in the automotive parts industry are also accelerating. According to the "Analysis of the Current Situation and Investment Prospects of China's Automotive Parts Industry (2023-2029)" released by Guanyan Report Network, the number of investment and financing events in China's automotive parts industry has been relatively stable, reaching a peak of 65 in 2021. There were 58 investment events between January and July 2022.
(Source: Guanyan Report Network)
According to data from Forward Research Institute, the investment and financing market of China's automotive parts industry showed a fluctuating growth trend from 2014 to 2020. In 2020, the investment scale of China's automotive parts industry was 5.364 billion yuan. The Forward looking Research Institute predicts that there is still a lot of investment space for automotive components, and points out that in the future, component companies will invest more actively, promote technological innovation through research and development investment, achieve the upgrading of the component industry, and further promote the upgrading of China's automotive components industry, achieving the development of automotive components from low-end manufacturing to high-tech fields.
At present, the development of automotive intelligence will significantly accelerate. For example, according to the research report of Guotai Junan, from the second half of 2022 to 2023, multiple manufacturers will strive to implement quasi L3 autonomous driving functions such as high-speed navigation and urban navigation, and the quasi L3 autonomous driving function is expected to be implemented on a large scale. According to the prospectus, Zhongjie Automobile plans to raise 421 million yuan for the construction and expansion of a digital intelligent factory, the construction of a new research and development center, and supplementary working capital when applying for listing.
Changjiang Securities predicts that in 2023, multiple factors such as policies, the epidemic, and the economy will be positively improving. The independent brand of the whole vehicle is in the cycle of intelligent electric new vehicles, and the trend of independent rise is clear. Referring to the smartphone industry, smart electric vehicles will nurture large market value component companies. The four major factors of downstream pattern changes, shortened development cycles, hardware modularization trends, and localization of differentiated configurations will drive the acceleration of domestic components to replace foreign components.
