Universal bearings: gross margins under the new pulley hub bearings become a new strategic focus

From January to September 2010, the company achieved operating income of 5.899 billion yuan, an increase of 53.4% ​​over the same period of last year. The net profit attributable to the parent company owner was 297 million yuan, a year-on-year increase of 65%.

In the third quarter, the company realized operating income of 1.76 billion yuan, a year-on-year increase of 23.5%, and net profit attributable to owners of the parent company was 80.79 million yuan, a year-on-year increase of 21%. Basically in line with our expectations, fully spread the earnings per share: 0.066 yuan.

Revenue growth, gross margins fell slightly. In the third quarter, the gross profit margin of the company was 16%, which was a slight decrease of 0.25 percentage points from the previous quarter and a decrease of 3 percentage points from the same period of last year.

The company's universal joints occupy the first place in the domestic mainstream market share; hub bearings and wheel hub bearing units rank first in the country in terms of quality, productivity and scale; the major domestic vehicle manufacturers Shanghai Volkswagen, FAW-Volkswagen, Shanghai GM, etc. are all Its partner; the production capacity of constant speed drive shaft ranks second in the country. We believe that the market share of the company's driveshafts and joints has been relatively high. At present, if there are no obvious technological updates and market expansion, the company's gross profit margin or market share will remain stable or slightly decline. The sequential decline in gross margins for two consecutive quarters may be due to a slight increase in the labor cost of the company and the price of steel (4529, 126.00, 2.86%).

Wheel bearings become a new strategic focus. In the first half of the year, the company added RMB 137 million and RMB 30 million to its main bearing manufacturers Wanxiang Precision and Qianchao Bearing, respectively, for capacity expansion and technology research and development. The gross profit margin of the company's bearing products in 2009 was 21.8%, and the current production capacity was 10 million sets per year. During the first half of the year, it was at full capacity and there was an urgent need for capacity expansion. The company plans to expand its bearing capacity to 20 million sets per year in 2012. Bearings The scale of production and sales will gradually increase.

Investment Aspect: 1) Intervention in new energy automotive components: The company plans to invest 200 million yuan for the research and development of electric vehicle motors and electronic control systems in 2 years. We believe that Wanxiang Group's new energy vehicles will adopt lithium batteries - motors and controls. System - Three-step vehicle strategy, the company relies on Wanxiang Group's technological advantages, the development of new energy vehicles in the field worth looking forward to; 2) private placement was completed in the first half of 2010, raised about 1.8 billion for the year In order to expand production capacity as quickly as possible, the company has already invested some 8.4 million sticks of constant speed drive shafts. It is estimated that the total production capacity will take 3 years to reach production capacity. It is expected that the production capacity of the constant speed drive shaft will reach 10 million after the completion of production in 2013. , The domestic constant-speed drive shaft leading position is stable.

profit prediction. It is expected that the EPS for 2010-2012 will be 0.31 yuan, 0.51 yuan, and 0.66 yuan respectively. According to the stock price of 15.04 yuan calculated on October 25th, dynamic PE is 31 times, 21 times, and 17 times respectively. We are optimistic about the company’s future development in the strategic layout of traditional components and new energy sectors, and maintain the investment rating of “overweight”.