Wanliyang: Awaiting a complete commercial vehicle gearbox strategy

Event Description

Wanliyang intends to adopt a combination of the placing of inquiry objects participating in offline distribution and the pricing and issuance of online capital subscriptions. The total share capital of the company before the issuance is 127.5 million shares. The company plans to publicly issue 42.5 million shares, of which 34 million shares will be listed on the first day, and the total share capital of the company will be 170 million shares after the issuance.

The fund-raising plan will use 580.33 million yuan for an annual output of 280,000 sets of automotive transmission investment projects, including 80,000 heavy trucks, 20,000 buses, and 180,000 high-end light trucks to help the company expand its business and fully deploy the commercial vehicle transmission market. The investment of 40.11 million yuan was used for the construction of an automotive transmission technology R&D center, and through the continuous introduction of new products, the risk of the gross profit margin of the transmission market was reduced.

We estimate that in 2010-2012, based on the company’s 170 million shares after the issuance, the company’s earnings per share of 1.13,1.55,1.98 yuan will be calculated, and the company can be valued at a price-to-earning ratio of 25-30 times 2010 earnings, corresponding to a subscription price of 28.3-33.9 yuan.

Event Comment

Company Overview

The total share capital of the company prior to the issuance was 127.5 million shares. After the issuance, the company had a total share capital of 170 million shares. The actual controllers before the issue were Mr. Huang Qinghe and Ms. Wu Yuehua. The husband and wife jointly controlled 51% of the company's shares. The company owns six participating companies, namely Wanliyang Machinery, Changsha Wanliyang, Jinhua Wanliyang, Sichuan Wanliyang, Beijing Meiytun, Wuhan Boyang, Shandong Lingong, and the corresponding shareholding ratio is 100% and 100% respectively. , 100%, 100%, 88.2%, 70.% and 37.55%. Wanliyang Machinery mainly produces transmission housings for its parent company. Wuhan Boyang is mainly responsible for purchasing and exporting products to its parent company. Shandong Lingong is mainly engaged in the manufacture of micro-card transmissions and excavators. Changsha Wanliyang, Jinhua Wanliyang, Sichuan Wanliyang, and Beijing Meiyutun is currently in the preparatory stage and will mainly produce automobile transmissions and components after the investment project is put into operation.

Main commercial vehicle gearbox, light and medium-sized card as the key supporting market

The company specializes in the production and sales of commercial vehicle transmissions. It mainly provides support for domestic large and medium-sized commercial automobile manufacturers such as Beiqi Foton, Dongfeng Automobile, Chengdu Trump, Ziyang Nanjun, and so on. Currently, it has an annual output of approximately 300,000 commercial vehicle transmissions. According to the statistics of the China Geareducer Association, China National Association of Machinery Parts and Components, the company’s production of commercial vehicle transmissions ranked third in the industry in 2008. In 2009, the company sold 296.5 sets of various transmissions, an increase of 39.69% over the same period last year.

The company's main products are divided into light trucks, medium-duty trucks, heavy trucks and passenger cars. They are marked and modularized in design, and are intensive and lean in manufacturing, reducing costs through large platform manufacturing. Due to proper management methods, and a large number of self-made parts are used to reduce costs, the company's gross profit margin has been continuously improved. The main gross profit margins in 2007, 2008 and 2009 were respectively 20.61%, 25.07% and 29.23%.

From the perspective of income structure, the company's main business income mainly comes from the light truck transmission series products and the Chinese card transmission series products. The company has an advantageous competitive position in the light-medium gear transmission market. In 2007, 2008 and 2009, the above two series of transmission sales revenue accounted for 95.43%, 94.01% and 96.54% of the total revenue of the main business during the same period. . [next]

Transmission market development characteristics

Currently in the Chinese market, manual transmissions dominate the market. For passenger cars, manual transmissions and automatic transmissions account for 60% and 40%, respectively, and commercial vehicles, especially trucks, are basically manual transmissions.

Automatic transmissions are currently heavily dependent on foreign imports. On the one hand, foreign manufacturers with related technologies have imposed various degrees of technical blockade on domestic manufacturers. Even if they are domestically produced, they all choose to be produced by foreign-capital holding companies or wholly foreign-owned enterprises. On the other hand, domestic related R&D progress is slow and autonomous. The automatic transmission of intellectual property has not yet achieved mass production. According to the statistics of China Association of Automobile Manufacturers, in 2006, the output of automatic transmission passenger cars in China was 1.61 million, of which 1.26 million were used for imported automatic transmissions (the rest were joint ventures or wholly-owned enterprises), and the import value of automatic transmissions reached 1.637 billion U.S. dollars;

In 2007, China’s imports of automatic transmissions exceeded US$2.5 billion.

In terms of manual transmission, due to the long-term development of domestic manufacturers in China, the design principles and production processes and technologies are relatively mature and stable, and the technical difficulty is smaller than that of automatic transmissions. At present, China's automobile transmission industry has already established itself on the basis of "local" production, which basically meets the needs of the domestic vehicle manufacturers, has occupied most of the domestic market share, and has already exported some products. Like the emergence of sub-industry leaders in recent years, Wanliyang has occupied more than 70% of the market share in China Card, and Fast has occupied more than 40% of the heavy-duty card market with more than 8 tons, and most of them are mainly integrated with domestic ones. The car manufacturers have a long-term cooperation relationship. Therefore, in the manual transmission field of manual transmissions, especially in the commercial vehicles, domestic-funded enterprises have an absolute competitive advantage.

Lighter and medium-cart business is more concentrated and has a good supporting relationship with the downstream

Existing layout with Foton Motor as its main customer

The existing business of the company presents the characteristics of a relatively concentrated customer base. In particular, Beiqi Foton and its subsidiaries accounted for more than 50% of the main business revenue during the reporting period. However, over the years, the degree of concentration has gradually declined. In the sales intention contract of the fund-raising project, the company and Beiqi Foton reached a sales intention of 60,000 heavy truck transmissions, 100,000 light truck transmissions, and 0.15 million passenger car transmissions, totaling 161,500 units, accounting for the total sales intention of the project products. About 50% accounted for 58% of the company's raised funds to invest in new transmission capacity. We believe that the intentional order after such a long time can be interpreted as the determination of the high-level strategic cooperation between the two parties, and can also explain Futian’s recognition of the company’s products.

Joint sales with Foton Cummins

At present, the Company’s existing intentional orders for light-medium gear transmissions have reached 219,000 units, and the company’s high-end light-duty truck transmissions have also been recognized as standard transmissions worldwide by Foton Cummins light-duty trucks, both of which use joint sales.

Prior to this, China's high-end light trucks were constrained by the lack of engine resources, and the main supporting engines were small in displacement with a load of 1.5 to 2 tons. However, with the improvement of living standards, there will be more and more demand for high-end light trucks with higher quality. The high-end light trucks with a load capacity of about 4 tons will be developed by Fukang 3.8L to open up a new domestic market. Its success. Whether or not it depends on the stringency of the implementation of emission regulations and the company's marketing strategy. As the company's most important supporting transmission will be accompanied by the rapid increase in the speed of the company's engine will bring a new round of sales climax. [next]

Good relationship with the downstream

Among the top ten customers of the company, eight customers including Beiqi Futian, which is the largest customer, are not directly subordinated to commercial vehicle transmission manufacturers. Commercial vehicle transmissions required for outsourcing are required to be purchased from outside. This situation further expands the market, strengthens and main The customer's strategic cooperation relationship has created favorable conditions; Dongfeng Motor and Anhui Jianghuai have companies that produce commercial vehicle transmissions within the group, but according to company-related research, Dongfeng Automobile Transmission Co., Ltd. and Liuan Jianghuai Automobile Gear Manufacturing Co., Ltd. are in the group. The internal supply ratio is below 50%. Dongfeng Motor and Anhui Jianghuai still have a large proportion of commercial vehicle transmissions that need to be purchased from the market, and they have not set high barriers to entry for external procurement transmissions. Therefore, the above conditions are for sales of the company. The impact is not great.

Overall layout, heavy truck business prospects

Heavy truck industry is expected to achieve about 30% growth in 2010

The cumulative sales of the heavy truck industry in January-April 2010 were 383,000 units. In May, the sales volume of the whole bank is expected to be about 100,000 to 105,000 units. In June, it is expected to sell 80,000 vehicles. We expect that the sales volume in the first half of the year will be about 550,000-56 vehicles, and the whole year will Sales of more than 800,000 vehicles increased by 30% year-on-year.

After more than three years of R&D and testing, the company's heavy-duty transmission has been fully developed and ready for production. The company's independent research and development of the core technology of heavy-duty truck transmission for the single front and rear dual-vehicle transmission, to solve the problem of heavy-duty transmission must step on the two-foot clutch shift, improve the driving comfort, from the front of the single-axis main box and the rear double countershaft The box has a well-structured and reliable car transmission and has obtained national patents. According to the company's field road test in the past year, it can save 3% to 5% of fuel compared to an ordinary heavy truck transmission. We cautiously estimate that the average heavy truck will run 10,000 kilometers a year. The fuel consumption per 100 kilometers is 40 liters (the actual value may be higher), and the oil cost will be saved by nearly 1,000 yuan in one year. Therefore, the market prospect is quite extensive.

The growth of the company's heavy-duty truck transmission business still requires the company to work hard to make the heavy-duty card transmission industry the fastest in the current Fast, better service network, product overload performance. The gearbox itself is not in the car announcement directory management system, which has brought convenience to the company's breakthrough in OEM manufacturers. Its breakthrough mainly depends on the product's performance, market familiarity, network construction, and the strategic intention of the host plant. Although the company has already obtained intentional orders from OEMs, it still requires arduous work to realize the order to become a reality order, and may face difficulties in marketing due to the blockade of competitors and instability in the early stage of product promotion.

Competitive cost advantage

High self-restraint rate of major components

The main components of the transmission include the housing, pinion (gear and shaft) and synchronizer. The cost of the above three components accounts for more than 60% of the total cost of the transmission. At present, among the manufacturers of commercial vehicle transmissions in China, there are widespread outsourcing of the three major components. Some large and medium-duty commercial vehicle transmission manufacturers can only solve the self-manufacture of some components. The company's three major parts and components are very self-managing, and the self-manufacturing rates of the housing, pinion and synchronizer are all over 90%. Among them: The synchronizer is produced by the company's Synchronizer Industry Department. Before 2008, due to limited production capacity, it was unable to meet the requirements of the transmission production, and some of the synchronizers needed outsourcing. Starting in 2008, with the exception of heavy-duty trucks and passenger car transmissions, the synchronizers required for light trucks and mid-gear transmissions were all self-manufactured; castings such as the housing and a part of the top cover were produced by Wanliyang Machinery, a holding subsidiary; and the pinion was originally an associated party. Tsinghua Industrial provided that with the acquisition of all the related assets of Tsinghua Industrial in 2007 and 2008, the company has now produced all of its products. At the same time, due to the location of the Jiangsu region where parts factories are concentrated, the cost of purchased parts is also low.

Lean management, intensive production In recent years, the company has adopted lean management models, effective cost control measures, and profit-ability has been increasing year by year. From 2007 to 2009, the gross profit rate of automobile transmissions was 20.61%, 25.07% and 29.23%, respectively. Gross margins of other accessories have increased year by year. Due to the adoption of standardization and modularization in design, intensive and lean manufacturing is used in manufacturing, and gearboxes of different specifications are integrated on a large platform, which effectively reduces the cost of manufacturing platforms and assembly lines. Since 2007, the company has achieved a high gross margin of over 40% on the basis of low sales of heavy truck transmissions and passenger car transmissions. After intensive production, the company's design verification cycle was reduced from one year to three to four months, and the delivery period was shortened by one month. [next]

Greater ability to transfer downstream costs

Commercial vehicles, because they are used in many production operations, have a relatively strong ability to shift costs downstream, and transmissions, which are the main components of commercial vehicles, also have certain downstream conditions for transferring costs. In addition, the company's market concentration is relatively high, and it has a close relationship with the entire machine manufacturer. Therefore, when the price of raw materials fluctuates greatly, the company will renegotiate with customers in a timely manner to determine the new sales guidance price, with its own scale advantages and technologies. Advantages and specialized production can still better control, transfer and absorb the pressure of rising costs. From the perspective of the changes in the company's gross profit margin, we believe that the company has a strong ability to shift costs downstream.

As a whole, the company, as a private enterprise, has strong control over costs. Through effective measures such as increasing the rate of self-production, improving the management mode, and shifting the cost downstream, it is possible to maintain the volatility of product prices below the fluctuation range of raw material prices and profitability. More stable.

Company's future development strategic plan

We believe that in the future, the company will focus on several strategic aspects:

1. The existing production capacity will be expanded and the technical transformation of the production line: The company may conduct further high-efficiency, high-precision R&D and transformation of the existing core product lines, further improve the production capacity and quality of all types of transmissions, and ensure the leading position of the products in the domestic market. .

2. To further build a passenger car transmission base: In 2009, Wanliyang added a land use right of 57,046 square meters, and the two preparatory establishments in Beijing Meiytun and Changsha Wanliyang also each have a land use right. With an area of ​​82,949.97 and 80,523.00 square meters respectively, the land problem has been solved. The company will select and put into operation 300,000-500,000 passenger car transmission investment projects in the future.

3. Integration of complete plant resources: At present, the company's own capacity is tight, and the demand for downstream whole plant is strong. In 2009, each downstream plant even took delivery of goods to accelerate the turnover of goods. In order to further effectively expand the market and reduce the risk of relying on a single machine factory, the company may consider extending its extension to other downstream plant companies to integrate reasonable resources.

4. Automatic Transmission: As another category of transmissions, automatic transmissions are mainly used in passenger vehicles, and the market capacity is huge. The rapid growth of the current passenger vehicle market also makes the demand for automatic transmissions rise rapidly. The company's AMT automatic transmission has been completed and researched. At present, the supporting models are mainly for the military vehicles of the two steam vehicles, Zhengzhou Nissan and ZTE pickup trucks, Foton auto pickup trucks and military vehicles. In 2008, the company collaborated with the People’s Liberation Army Armored Forces Engineering Institute and Beijing Century Daheng Electronic Technology Co., Ltd. to jointly develop a 0.8-3.5L dual clutch automatic clutch (DCT) for passenger cars. The research and development period is 3 years.

This technology is not yet available in the country, and there are very few companies in the world. Once it is completed, it will have a huge impact on the domestic automatic transmission market.

Fundraising Investment Analysis

In recent years, the company's continuous increase in production capacity still cannot meet market demand, and the bottleneck of production capacity is obvious. The main purpose of this fundraising investment project is to expand production capacity and broaden the market, including an annual output of 280,000 sets of automobile transmission investment projects. According to the plan, the newly added capacity of 280,000 units, the heavy truck transmission 80,000, the light truck transmission 180,000, passenger car transmission 20,000 units, with a total investment of 580 million yuan.

The annual output of 280,000 sets of automobile transmission investment projects can be subdivided into two types of product development plans: One is to enhance the product quality and expand production capacity based on the company’s existing mass production of light truck transmissions, thereby further consolidating and developing the company’s The status in the light-duty truck transmission market; the other is the transformation of the factory building and the introduction of production lines on the basis of the existing small-lot trial production of heavy-duty truck and passenger car transmissions to achieve industrial mass production. Through the implementation of this project, the company's production scale will be further expanded and the product structure will be further enriched.

The technology R&D center construction project will enable the company's technological level and product development capability to further advance and consolidate and expand existing technology advantages. At the same time, the implementation of this project is of great significance in improving the overall technical level of China's transmission products and promoting the sustainable, healthy and rapid development of the industry.

Company valuation analysis

We estimate that in 2010-2012, the company's earnings per share based on 170 million shares will be calculated at 1.13,1.55,1.98 yuan.

Taking into account the company's growth and the current valuation of small and medium-sized auto parts and components stocks, we believe that the company can value the company at a valuation of 25-30 times 2010 earnings, corresponding to a subscription price of 28.3-33.9 yuan.

risk warning

The promotion of the company's gearbox in the heavy truck market is difficult to gain market recognition, the slowdown in the demand for downstream industries has slowed down, and the risk of investment projects in raised funds has not been smooth.

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