I. Performance and Valuation of Global Auto Parts Giants
The companies that entered the Top 100 Auto Parts Suppliers List in 2017 were mostly international mature parts and components companies. The average growth rate of the top ten companies' income was 7.9%, and the average income of the top 20 companies grew by 4.6%.
Chart: Average growth rate of income for the top 100 auto parts companies in 2017
Among the representative international component giants, taking the example of three listed companies, the valuation range in recent years generally fluctuates in the range of 10-20 times, corresponding to the growth rate of performance -10%-50%, and most of the time increase. The rate is lower than 20%, and the average income growth of a large number of high-quality parts companies in the Chinese market is higher than this level.
Chart: Net profit growth rate of Denso in recent years and PE(TTM)
Chart: Valeo's recent net profit growth and PE(TTM)
Chart: Net profit growth in Autoliv in recent years and PE(TTM)
Second, China's auto parts company's performance and valuation comparison
Since 2013, the revenue growth rate of the top ten companies in the global top 100 auto parts supplier list has been declining, while the average income growth rate of China’s parts listed companies in 2016 was 21.9%, and since 2013, The growth rate of income gradually rises.
Reference research released in the world "China's auto parts industry analysis report of 2018 - market depth investigation and investment prospects"
Chart: China's auto parts listed companies' income growth rate compared with the global giants
Recent data show that the average gross profit margin of listed auto parts companies is stable at about 20%, net profit is stable at about 7%, and main business income shows sustained high growth. Both revenue growth and net profit growth are higher than The growth rate of new vehicle sales is non-linear, and the gross profit rate and net profit rate are not directly related to the growth rate of vehicle sales.
Chart: Comparison between the financial ratio of auto parts industry and the growth rate of vehicle sales
In 2013, except for companies with negative growth performance, the core range of the arithmetic average valuation of individual stocks was between 15 and 40 times PE, and the company's valuation and net profit mostly matched the growth rates in the interval.
Chart: Growth rate of auto parts company in 2013 and PE
Judging from the market consensus forecast at the beginning of 2018, the core valuation range is still at 15-40 times PE, but the company's valuation and net profit have a large deviation from the previous year's growth rate. Most companies have lower valuations. Forecasted performance growth (as of 2018/2/14).
Chart: Forecast of the growth rate of auto parts companies in 2018 and PE
The announced performance forecast for 2017 shows that under the background of low growth rate of vehicle sales, the performance of most parts and components companies has maintained a positive growth, and a large number of high-quality companies still maintain a high growth rate of more than 30%. In the context of the expected low growth rate of vehicle sales in 2018, the market questions the stability of the profitability of parts and components companies. We believe that similar market conditions can be verified historically. In the same low growth rate of 2015, the auto parts company's profit margin remained stable under the background of price wars of various manufacturers. In addition, the competitive landscape of China's spare parts companies in 2018 has also been better than ever. High-quality companies continue to compete for market share from overseas suppliers, and gradually expand their own product lines, gradually moving from the original small assembly to the overall assembly. , with the increase in the value of bicycles. China's auto parts companies continue to increase their global competitiveness.
Chart: 2017 Preview of Auto Parts Corporation
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