Zhitong Financial APP News, November 26th, China International Capital Corporation, Jingjing Capital and other institutions participated in the investigation of Lingdian Electric Control (688667.SH). The investor relations activity record table shows that in terms of automobile electrification, electric control has been laid out in both hybrid vehicles and pure electric vehicles. The company predicts that next year will be a year of massive expansion in the field of hybrid vehicles.

With regard to the phenomenon of low cash flow in the financial statements concerned by the organization, Lingdian Electric Control said that the negative cash flow of operating activities should be a better phenomenon for the company. Because the bills received by the company are all 6 months old, they are not included in the positive statement of the cash flow statement, but only after the maturity of the cash flow statement. Negative means that the sales revenue is growing rapidly, and regularization means that the growth of sales revenue has stagnated. Although the cash flow statement is not good-looking, the company has no shortage of cash equivalents even after deducting the funds raised, because six-month notes can be used at any time relative to cash equivalents for the company. Therefore, we should pay more attention to the two subjects of notes receivable and accounts receivable financing in the schedule of the cash flow statement and the balance sheet. The larger amount of these two subjects indicates that the company has more funds.

In comparison, the pure electric vehicle control system has many competitors and poor industry pattern. In such a fierce industry competition, entering the supply system of the whole vehicle factory mainly depends on the advantages of cost and service. The company's main strategy is to enter VCU, where the market structure is better. At present, the company has made great progress in the field of VCU, and its business has covered most of the commercial vehicle enterprises.

Judging from the fuel consumption regulations and technology path, traditional gasoline vehicles will basically be replaced by new energy vehicles around 2025. No new pure gasoline vehicles are expected to be announced in 2025, and previously announced models can continue to be sold. However, the implementation of the new test conditions may cause previously announced models to be announced again.

Considering that battery technology is difficult to make a breakthrough in the short term, safety will be the key factor affecting the development of electric vehicles in the future. The company believes that hybrid models are a practical solution for quite a long time. There are technical differences between PFI engine and GDI engine, and the company has mastered both kinds of technology.

On how to view the market potential of commercial vehicles in the future, the company said that there is still a lot of market space for commercial vehicles in the future. In view of the substantial increase in the post-processing cost of diesel vehicles after upgrading to the sixth national emission standard and the influence of the national governance of blue light trucks with large tons and small standards, blue light trucks under 4.5 tons tend to change from diesel engines to gasoline engines, which has become a relatively large growth point for commercial vehicles. In addition, a major growth point of the commercial vehicle market comes from hybrid. The fourth stage fuel consumption of commercial vehicles will be promulgated in 2022, and the main means to deal with the fourth stage fuel consumption is also hybrid.

Open source securities recently pointed out that the in-cylinder direct injection EMS matching model independently developed by Lingdian Electric Control has entered the three high calibration stage, which is the first in-cylinder direct injection vehicle equipped with independent electronic control system in China, helping the company to enter the passenger car market, and there is a broad space for domestic substitution. Analysts also mentioned that the pure electric vehicle electronic control system market competition pattern is relatively scattered, the company earlier to achieve the industrialization of MCU and VCU, adhere to the cost-leading strategy. Increase promotion efforts in 2021, supporting a number of models in 2022 is expected to contribute to revenue. The company is expected to take advantage of EMS and hybrid customer resources to quickly open the pure electric vehicle market.

The specific questions and answers are as follows:

Q: what are the bright spots in the future business direction of the company?

A: automobile electrification and networking is not only the trend of the development of the industry, but also the strategic planning goal of the company's future development. The trend of passenger car GDI engine gradually appeared around 2015 and 2016. The company began to carry out research and development on GDI engine in 2014, and the technology platform is perfect in 2018. At present, there are two customer models in the calibration stage. In terms of automobile electrification, the company has a layout in both hybrid vehicles and pure electric vehicles. The company decided on the hybrid direction in 2016 and has been unswervingly following the hybrid path, and the company predicts that next year will be a year of massive expansion in the field of hybrid vehicles. In the field of networking, the company initially launched the product is T-BOX, but also want to make use of the company's advantages in the field of power system control, to do some characteristic network products to link the network and power system.

Q: what is the future layout of the company in the pure electric car market?

Answer: comparatively speaking, the pure electric vehicle control system has many competitors and the industry pattern is poor. In such a fierce industry competition, entering the supply system of the whole vehicle factory mainly depends on the advantages of cost and service. The company's main strategy is to enter the VCU field with a better market structure: VCU involves vehicle control technology, which is more complex and can give better play to the company's technological advantages, and its gross profit margin will be higher than that of MCU products. At present, the company has made great progress in the field of VCU, and its business has covered most of the commercial vehicle enterprises, which also confirms the strategic layout of the company in electrification.

Q: will gasoline cars be eliminated in the future? how long is it expected to take? Which one will dominate in the future, pure electric vehicles or hybrid vehicles?

A: judging from the fuel consumption regulations and technology path, traditional gasoline vehicles will basically be replaced by new energy vehicles around 2025. No new pure gasoline vehicles are expected to be announced in 2025, and models previously announced can continue to be sold. However, the implementation of the new test conditions may cause previously announced models to be re-announced.

The company set the direction of mixing in 2016. The fuel consumption guidelines announced at that time were that the fuel consumption of passenger cars would reach the target of 5L/ 100 km by 2020, 4L/ 100 km by 2025 and 3.2L/ 100 km by 2030. Judging from the technical path, pure gasoline vehicles can not meet the requirements of laws and regulations, and hybrid technology is an inevitable technical solution. From the perspective of carbon emission reduction, only in terms of use, the emission reduction effect of pure electric vehicles may not be better than that of hybrid vehicles. With the addition of battery production, plug-in hybrid cars can reduce emissions even more. Considering that battery technology is difficult to make a breakthrough in the short term, safety will be the key factor affecting the development of electric vehicles in the future. The company believes that hybrid models are a practical solution for quite a long time.

Q: is there a big difference in technology for commercial and passenger vehicles?

A: for the development and use of power control systems, there is no distinction between commercial vehicles and passenger vehicles. According to the requirements of the emission regulations of the automobile industry, the classification standards are light and heavy vehicles, not commercial vehicles and passenger vehicles; in the fuel consumption regulations of the industry, commercial vehicles are slightly different from passenger vehicles. Generally speaking, under the general trend of gradual strictness, commercial vehicles are more relaxed, and the requirements of passenger vehicles are several years earlier than those of commercial vehicles. At present, all the commercial vehicle engines in the industry are PFI engines; most passenger vehicles use GDI engines and a small part of them use PFI engines; GDI engines are more fuel-efficient but more expensive than PFI engines, but the fuel-saving effect of hybrid scheme is more obvious than engine technology, so there is also the possibility of hybrid scheme to re-use PFI engine, such as BYD's DMI hybrid PFI engine. Generally speaking, there is no technical difference between commercial vehicles and passenger vehicles, but there are technical differences between PFI engines and GDI engines, and the company has mastered both types of technology.

Q: how does the company view the market potential of commercial vehicles in the future? Is the overall situation of the commercial vehicle market growing or shrinking?

A: there is still a lot of market space for commercial vehicles in the future. On the one hand, the national six emission standards for diesel vehicles have been implemented nationwide since July 1, 2021. In view of the substantial increase in the post-processing cost of diesel vehicles after upgrading to the national six emission standards and the impact of the national governance of blue light trucks with "big tons and small standards", blue light trucks of less than 4.5 tons have a trend to change from diesel engines to gasoline engines, which has become a relatively large growth point for commercial vehicles. In addition, a major growth point of the commercial vehicle market comes from hybrid. The fourth stage fuel consumption of commercial vehicles will be promulgated in 2022, and the main means to deal with the fourth stage fuel consumption is also hybrid.

Q: how does the company explain the low cash flow in the financial report?

Answer: the cash flow of operating activities is negative for this kind of company should be a relatively good phenomenon. Because the bills received by the company are all 6 months old, they are not included in the positive statement of the cash flow statement, but only after the maturity of the cash flow statement. Negative means that the sales revenue is growing rapidly, and regularization means that the growth of sales revenue has stagnated. Although the cash flow statement is not good-looking, the company has no shortage of cash equivalents even after deducting the funds raised, because six-month notes can be used at any time relative to cash equivalents for the company. Therefore, we should pay more attention to the two subjects of notes receivable and accounts receivable financing in the schedule of the cash flow statement and the balance sheet. The larger amount of these two subjects indicates that the company has more funds.

Q: what is the strategy of the company's talent echelon construction?

A: on the one hand, the company is extensively absorbing experienced talents in the industry, bringing a more international vision to the company's original technical team through fresh blood, and project management has also been improved; at the same time, the strength of the R & D team has become a strong endorsement for the company to win customers. On the other hand, the company also pays attention to the training of talents, so that employees can get long-term accumulation and growth in their work.