LUCKY HARVEST(002965)：STELLAR EARNINGS IN LINE HARVEST EXPECTED IN 2023

　　Core views:
　　Lucky Harvest has seized opportunities in new energy by building a presence in new energy vehicle (NEV) structural parts, battery cases, power conversion systems (PCS) structural parts and has also entered close cooperation with top-tier clients. The Company kicked off rapid output growth in new energy business in 2022, and is set to embrace harvest in full-line deliveries and growth in 2023. Considering that the framework agreement signed between the Company and CATL will be implemented in 2023, we expect the battery cases supply share and delivery value to increase, and the energy storage system (ESS) cabinet to gain further orders. Take the pace of the Company's new production capacity into account, we tweak our 2022E/23E/24E EPS forecasts to Rmb1.40/4.50/6.10 (vs. Rmb1.44/2.92/4.16 previously) and reiterate the target price of Rmb100 along with the "BUY" rating.
　　Abstract:
　　The preannounced high earnings growth is in line with our expectations; rapid increase in output in 2023 is worth expecting. On Jan 6, 2023, Lucky Harvest released its 2022 earnings announcement, expecting attributable net profit (ANP) of Rmb240mn-252mn (up by 275%-293% YoY), including 4Q22 ANP of Rmb72mn-84mn (up by 728%-866% YoY). The significant growth is due to strong customer demand, mass production of new products, and rapid increase in order intakes. We expect 4Q22 ANP to decline slightly from 3Q22, mainly due to the impact of Covid-19 in Guangzhou at the beginning of 4Q22, and the delivery decline of major customer GAC. It is worth noting that the profitability still maintains the recovery trend since 3Q22. We expect the Company's 4Q22 net profit margin (NPM) to be stable compared to 3Q22 (we estimate the 4Q22 revenue at about Rmb1.0bn-1.1bn and the NPM to recover to about 7.5% based on the midpoint of the forecast range). With the gradual commission of incremental capacity and numerous assigned orders entering the delivery phase, the Company’s 1Q23 revenue will likely accelerate quarterly upward trend and profitability may be further improved on the basis of 4Q22. We expect the NPM to rise above 8% for the full year of 2023.
　　Entering into strategic cooperation agreement with CATL, the Company may expand its product supply share and delivery value. In Dec 2022, Lucky Harvest signed a strategic cooperation agreement with CATL, which focused on the cooperation of structural parts, stamping parts, thermal management system products, ESS cabinet, thermal forming and roll forming products in the field of battery cases. The term of cooperation is valid till Dec 31, 2026. With the implementation of the strategic cooperation content, we believe that the Company's subsequent project delivery ratio of battery case (including tray, top cover and other structural parts) will increase, driving up product unit value. In addition, ESS cabinets may gain further orders. We expect the Company's share of battery cases in CATL to increase to around 30% in 2023 (vs. around 10% in 2022). In the long run, we expect that the supply pattern of the core suppliers of structural parts in CATL will be gradually stable, and the supply share will be concentrated to the top suppliers. The reason lies in the fact that enterprises with the ability of geographical support, multi-process mastery, key customer binding and capital investment will be significantly ahead of other enterprises. Besides, the downstream customers are also carrying out supply chain integration, strengthening their binding relationship with core suppliers.
　　Potential risks: Intensified market competition; changes in technological reform; fluctuations in raw material costs; changes in market demand; fluctuations in exchange rates.
　　Investment recommendation: Lucky Harvest has been engaged in model design and stamping dies & parts for 18 years and has accumulated profound technical know-how through cooperating with overseas manufacturers, with leading edges in supply chain management, quality control & delivery of products and automation, etc. It has built a presence in high boom sectors, such as NEV structural parts, battery cases, PCS structural parts and established close cooperation with sector leaders, with sufficient backlog orders. As the capacity utilization continue being improved, the Company’s NPM is likely to start trending upward on a quarterly basis. Considering that the framework agreement signed between the Company and CATL will be implemented in 2023, we expect the battery cases supply share and delivery value will increase, and the ESS cabinet will gain further orders. Take the pace of the Company's new production capacity into account, we tweak our 2022E/23E/24E EPS forecasts to Rmb1.40/4.50/6.10 (vs. Rmb1.44/2.92/4.16 previously). Considering its high growth rate and the valuation of comparable companies (averaged 29x 2023E PE for Wencan Group (603348.SH), Hongtu Technology (002101.SZ) and Minglida Precision (301268.SZ) based on Wind consensus estimates), we assign 22x 2023E PE to Lucky Harvest and reiterate the target price of Rmb100 along with the "BUY" rating.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。