Date of Report: October 14, 2024
Broker: UOB Kay Hian
Company Overview
Joyson Electronics Corp is a leading global automotive parts supplier, specializing in smart driving systems, automotive safety systems, power management systems, and Internet of Vehicles technologies. The company continues to expand its offerings with a strong focus on the growing electric vehicle (EV) market and intelligent driving systems.
Stock Data
- Ticker: 600699 CH
- Sector: Automobile
- Share Price: RMB 16.52
- Target Price: RMB 30.00 (Upside +81.6%)
- Market Cap: RMB 22.6 billion (USD 2.9 billion)
- Shares Issued: 1,368 million
- Average 3-Month Daily Turnover: USD 33.9 million
- 52-Week Price Range: RMB 20.53 – RMB 12.64
Financial Highlights
Joyson Electronics is forecasting significant revenue growth and profit improvements over the next few years.
- Revenue Forecast (2024-2026):
- 2024: RMB 60.2 billion
- 2025: RMB 66.0 billion
- 2026: RMB 72.5 billion
- Net Profit Forecast (2024-2026):
- 2024: RMB 1.5 billion
- 2025: RMB 2.0 billion
- 2026: RMB 2.6 billion
The company’s key financial ratios indicate improving margins and profitability:
- EBITDA Margin: Expected to rise to 11.5% by 2026
- Net Profit Margin: Forecasted to reach 3.6% by 2026
- PE Ratio: 15.0x for 2024, dropping to 8.7x by 2026
- Dividend Yield: Rising from 1.6% in 2023 to 3.8% by 2026
Key Business Drivers
-
Revenue Growth
Joyson Electronics is targeting a 10% revenue growth for 2025, supported by strong new orders, particularly in the EV and domestic automotive markets. In 1H24, new orders totaled RMB 50.4 billion, with RMB 30 billion linked to EVs, which accounted for 60% of total new orders. Domestic orders contributed RMB 23 billion.
-
Product Innovation and R&D
The company continues to invest in key technologies like Advanced Driver Assistance Systems (ADAS), vehicle-to-everything (V2X) communication, and intelligent cockpits. They are working with leading chip platforms such as Qualcomm, Horizon, and Black Sesame to enhance their ADAS solutions and have secured key projects such as the Ningbo High-tech Zone vehicle-road-cloud integration.
-
Cost-Cutting and Efficiency Measures
Joyson is implementing cost-cutting and efficiency-improvement strategies. Key initiatives include optimizing the global supply chain, enhancing production synergies, and embedding cost management across the product lifecycle. This is expected to improve the gross margin by 2.1 percentage points between 2024 and 2026.
Focus on China’s EV Market
Joyson is heavily investing in China’s booming EV market, with new R&D and production facilities, such as the Hefei Industrial Plant, expected to produce 4 million steering wheels and 10 million airbags annually. The company is working closely with domestic automakers, offering customized solutions that meet local market trends and regulations.
Expansion in Overseas Markets
With its extensive international footprint, Joyson is positioning itself as a strategic partner for Chinese automakers expanding globally. They have secured several overseas orders from Chinese brands and are exploring new local partnerships in Europe, Southeast Asia, and the Americas to strengthen their presence in key export markets.
Financial Strength
Joyson Electronics is improving its debt profile, with net debt to equity expected to decline from 112% in 2023 to 64.6% by 2026. The company’s strong cash flow, supported by increasing profits and stable R&D investment, is expected to result in significant cash inflows in the coming years.
Valuation and Recommendation
The company is valued with a target price of RMB 30.00 based on a 10-year discounted cash flow (DCF) model, with a WACC of 10% and terminal growth of 5%. The target price implies a 20x PE for 2025 and 2.5x P/B ratio. The recommendation for Joyson Electronics is BUY, with strong growth potential driven by new product launches, expansion into EVs, and efficiency improvements.
