时代新材(600458.CN)

Zhuzhou Times New Material Technology:Automotive business integration shows early results;FX losses weigh on profit

时间:16-09-21 00:00    来源:瑞银证券

Automotive business integration picks up speed

The company (TMT) completed the acquisition of BOGE Rubber & Plastics (BOGE) in2014. Apart from providing automotive vibration reduction products/services, TMTcontinues to deepen the integration of BOGE. Helped by the rapid development of theautomotive business, rubber and plastic products had H116 revenue of Rmb2.9bn(+11% YoY) and net profit of Rmb25.92m (full-year 2015: Rmb2.32m). TMT isexpanding production capacity for automotive products in China. It has establishedsubsidiaries in Wuxi and Zhuzhou in the hopes of expanding China's mid-range/highendcar and commercial vehicle markets. Preparations are underway to build the Wuxiplant. We see sizeable long-term potential for TMT's rubber and plastics business.

We expect FX losses to remain a big drag on 2016 net profit ex. one-offs

The euro has continued to strengthen YTD. In H116, TMT recorded FX losses ofRmb54.1m, shaving c28% off net profit excluding one-offs in the period. The UBSmacro team sees the euro/Rmb pair trading at 7.888/8.520 (previously 7.714/8.400) in2016/17. If the euro strengthens further, TMT will likely adjust the size of its eurodenominatedliabilities to bring FX losses under control, in our view. Therefore, weforecast TMT's euro liabilities to fall to 183m/128m in 2016/17, resulting in FX lossesof Rmb145m/81m, with a 41%/21% impact on 2016/17 net profit excluding one-offs.

Raising FY earnings estimates; government subsidies boost net profit

Based on the performance of TMT's various segments in H116, we are cutting our railtransit/wind power revenue growth forecast while raising our rubber/plastic revenuegrowth estimate. As a result, our 2016/17/18E revenue is 2%/2%/2% lower thanpreviously, at Rmb11.6bn/12.5bn/13.1bn. We estimate government subsidies atRmb120m/20m/20m in 2016/17/18. In this case, we derive our 2016/17/18E net profitexcluding one-offs of Rmb200m/290m/380m, +3%/+7%/flat compared with ourprevious estimates.

Valuation: Slightly lifting price target to Rmb16.2; maintain Neutral

Our 2017E BVPS is Rmb6.75. Our new price target of Rmb16.2 is based on 2.4x 2017EP/B (referencing the industry average; our old PT was based on Rmb6.06 2016E BVPSand 2.5x target P/B). We are bullish on the long-term potential of the automotivevibration reduction product business and view the market's valuation as fair. Wemaintain our Neutral rating.