Date of Report: October 30, 2024
Broker: UOB Kay Hian
Company Overview
Joyson Electronics (600699 CH) is a leading global supplier in the automotive industry, specializing in advanced automotive safety systems, smart driving solutions, power management, and Internet of Vehicles (IoV) technology. The company is recognized for its extensive research and development capabilities, which enable it to drive innovation across critical automotive components.
Financial Performance in 3Q24
In the third quarter of 2024, Joyson Electronics reported steady performance, with net profit meeting expectations despite minor fluctuations in revenue. The growth was largely attributed to strong performance in the automotive safety division, which saw profitability improvements.
Key Financial Metrics (3Q24)
- Revenue: Rmb14,056 million, a slight decline of 1.7% year-over-year (yoy) but a sequential growth of 1.8%.
- Gross Margin: Increased to 15.7%, up 0.8 percentage points (ppt) yoy, with stable contributions from the automotive safety business.
- EBIT: Rmb831 million, representing a 35.1% yoy increase, supported by cost management.
- Net Profit: Rmb305 million, with core net profit growing by 10.1% yoy.
Revenue Breakdown and Market Performance
Joyson’s revenue across various segments remained steady, with the automotive safety and electronics businesses showing resilience in a competitive market environment. By segment:
- Automotive Safety: Revenue reached Rmb28.4 billion, reflecting strong demand.
- Automotive Electronics: Revenue stood at Rmb12.7 billion, with new orders bolstering growth potential.
New orders in 9M24 amounted to Rmb70.4 billion, with a significant 53% of these related to electric vehicles (EVs), illustrating Joyson’s expanding role in the EV market.
Strategic Growth in Automotive and EV Sectors
Joyson continues to capitalize on the global trend toward vehicle electrification and smart automotive technology. Notable highlights include:
- EV Market Penetration: In 9M24, new orders linked to EVs totaled Rmb37.6 billion, with substantial investments in advanced driver assistance systems (ADAS), intelligent cockpit solutions, and vehicle connectivity.
- Domestic Partnerships: The company has strengthened collaborations with domestic brands, with new orders from local partners accounting for 44% of total new orders (Rmb31 billion).
Cost Management and Margin Improvement
Joyson’s strategic focus on operational efficiency has enabled improvements in profit margins, particularly in the automotive safety segment. The company has implemented several cost-control measures, including:
- Capacity Relocation: Streamlining production facilities to optimize resource use.
- Workforce Optimization: Enhancing labor efficiency through structural adjustments.
- Supply Chain Management: Leveraging strong supplier relationships to control material costs.
These efforts have contributed to an improved gross margin forecast of 15.8% in 2024, with a target of reaching 17.1% by 2026.
Financial Outlook and Forecasts
Looking ahead, Joyson Electronics is expected to sustain its growth trajectory with a projected revenue compound annual growth rate (CAGR) of 9% from 2024 to 2026. The revenue forecast for 2024-2026 is bolstered by new product launches and increased orders from the EV segment, with projections as follows:
- Revenue: Rmb60,196 million in 2024, Rmb66,001 million in 2025, and Rmb72,535 million in 2026.
- Net Margin: Expected to rise gradually, reaching 2.5% in 2024 and 3.6% by 2026.
Earnings Projection and Recommendation
UOB Kay Hian maintains a “BUY” rating for Joyson Electronics with a target price of Rmb26.00, derived from a 10-year discounted cash flow (DCF) model. This target is based on a weighted average cost of capital (WACC) of 12% and a terminal growth rate of 4%, reflecting the company’s growth potential within the automotive and EV sectors. Joyson’s target PE for 2025 is set at 18x, signaling an optimistic outlook for investors.
