2021-12-24 Wang Jianchao of Xinda Securities Co., Ltd. conducted a research on Tenglong shares and issued a research report "spare parts business meets new machines, layout hydrogen energy for development". This report gives a buy rating on Tenglong shares, and the current share price is 16.66 yuan.

Tenglong Co., Ltd. (603158)
Epitaxial mergers and acquisitions enrich auto parts business and lay the foundation for system integration. The company started from the automotive air conditioning pipeline business, enriched auto parts through epitaxial mergers and acquisitions, acquired 54% equity interest in Littleo (the main product is EGR cooler) in September 2017, and opened the EGR industry chain at the end of 2017. In October 2019, it controlled Beijing Tianyuan and laid out engine turbocharged hose. At present, the two main businesses of the company are thermal management system parts and engine energy-saving and environmental protection parts, which are used in traditional cars, hybrid vehicles and pure electric vehicles. In addition, the company invests in Xinyuan Power, which currently holds a stake of 29.64% (semi-annual report for 21 years), laying out the hydrogen fuel cell business.
The complexity of the thermal management system of new energy vehicles is high, and the quantity and price of bicycle parts are on the rise. 1) Air conditioning system: in refrigeration, new energy vehicles are similar to traditional cars. In heating, traditional vehicles use engine waste heat, while new energy vehicles need to be equipped with PTC/ heat pumps for heating. 2) Heat dissipation: traditional cars only need heat dissipation for engines, while batteries, motors and electric controls for new energy vehicles all need heat dissipation. With the increase of the number of pipes in the thermal management system of new energy vehicles, the technical requirements of pipe end forming, sealing groove spinning, pipe bending and sealing welding between pipes are improved, and the product price is increased, and the value of the car is 3-4 times that of the traditional car. In 2020, the company's auto thermal management parts business income of 836 million yuan, accounting for 47%, is the largest source of income. With the improvement of the permeability of new energy vehicles, the expansion of production bases in Europe and the development and cooperation of carbon dioxide heat pump technology, the company's thermal management parts business is expected to grow at a high speed.
With the upgrading of automobile exhaust emission standards, the installation rate of EGR is expected to increase. EGR system is a kind of engine exhaust gas purification device, which allocates part of the exhaust gas to re-enter the cylinder and participates in combustion together with fresh mixture to reduce the combustion temperature. For diesel engines, it can directly reduce the concentration of nitrogen oxides in the engine, and for gasoline engines, it can improve fuel efficiency and reduce fuel consumption. Since 2000, China has formulated a series of environmental protection laws and regulations for motor vehicles, the emission standards have been continuously improved, and the technical route of tail gas treatment has been continuously upgraded. Since July 21, the national sixth standard has been fully implemented for heavy vehicles, some diesel engines have adopted DOC+SCR route, and more EGR+DOC+DPF+SCR has been adopted under national sixth, and the demand has been increased due to the upgrading of laws and regulations. In 2020, the company's EGR business income of 189 million yuan, covering Hanang, Mahler, Yunnei, well-off, Weichai, Quan Chai and other customers, the business volume is similar to Longsheng (EGR product income of 223 million yuan in 2020), has a certain market share, and is expected to enjoy the rapid growth of demand dividends brought by the policy.
The layout of hydrogen fuel cell business has become the largest shareholder of Xinyuan Power. Founded in 2001, Xinyuan Power is the contractor of the "National Engineering Research Center for fuel Cell and hydrogen Source Technology". Since its inception, it has undertaken the vehicle fuel cell engine development project, a major project of the Ministry of Science and Technology "863". The innovative achievements cover the key materials, key components and the whole pile system of the proton exchange membrane fuel cell engine system, and have nearly 400 patented technologies with independent intellectual property rights. The second-generation product HYMOD ®- 36 produced by Xinyuan Power successfully applied SAIC Roewe 750and SAIC Chase FCV80, becoming the first fuel cell in China with a durability breakthrough of 5000 hours, which can be started at-10 ℃ and stored at-40 ℃. The third-generation product HYSTK ®- 70 became the first highly integrated high-power stack with independent intellectual property rights in China. Hydrogen fuel cell is a new energy solution for heavy commercial vehicles in the future because of its high power density and long mileage. At present, policy support is strong, and the first batch of fuel cell vehicle demonstration cities have landed. Among them, Beijing plans to promote a total of 10,000 vehicles by 2025. The company actively arranges the business of hydrogen fuel cells and core components, making full use of customer resources and manufacturing capacity, which is conducive to long-term development.
Profit forecast and investment rating: we expect the company to achieve income of 2.14 billion yuan, 2.706 billion yuan and 3.318 billion yuan in 21-23 years, + 20.8%, + 26.5% and + 22.6% compared with the same period last year, and the net profit of 158 million yuan, 237 million yuan and 295 million yuan. Year-on-year + 1.7%, + 49.4%, + 24.7%. The current stock price corresponds to 22 years of PE24.7x, which is lower than the industry average. It is optimistic that the quantity and price of thermal management parts driven by new energy vehicles, the demand growth of EGR system driven by the upgrading of environmental laws and regulations, the long-term planning of the layout of high-quality hydrogen fuel cell assets, and the ability to expand development through investment, mergers and acquisitions, will be given a "buy" rating.
Risk factors: the penetration rate of new energy vehicles is lower than expected, the EGR installation rate is lower than expected, the capacity construction is not as expected, and the development of hydrogen fuel cell is not as expected.

The stock has been rated by one agency and one buy rating in the last 90 days; the average institutional target price has been 18.36 in the past 90 days; according to the Securities Star valuation analysis tool, Tenglong (603158) good company has a rating of 3 stars, a good price rating of 3 stars, and a comprehensive valuation rating of 3 stars. (rating range: 1-5 stars, up to 5 stars)