H&T INTELLIGENT CONTROL(002402)：PLANS TO RAISE RMB650MN VIA PRIVATE PLACEMENT;ACTUAL SHAREHOLDER’S OVERWEIGHT SHOWS CONFIDENCE

　　What's new
　　H&T Intelligent Control （H&T） has unveiled a plan to issue Rmb650mn A-shares in 2022 for the building of a global operation center for automotive electronics （Rmb250mn） and a digital smart storage project （Rmb100mn）。 The remaining Rmb300mn will be used as working capital.
　　Comments
　　Actual shareholder’s overweight shows confidence. LIU Jianwei, chairman and actual shareholder of H&T, held a 16.24% stake in the company. According to the issue price of Rmb13.92/sh, we think the firm will issue about 46.70mn shares and LIU Jianwei will hold a 20.32% stake after the issuance. The firm sets a lockup period of 18 months for those shares after the issuance. It has accumulated years of experience in intelligent controllers and expanded to automotive electronics and renewable energy businesses. We expect the business structure to support stable long-term growth. According to the equity incentive target released in January, the firm expects its attributable net profit to grow 21.7% YoY in 2022 and 29.4% YoY in 2023. We believe the actual shareholder’s overweight demonstrates his confidence in H&T’s long-term growth prospects.
　　Automotive electronic business constitutes a new growth driver. In 2021, revenue from H&T’s automotive electronic business grew 66.2% YoY to Rmb164mn. H&T built close ties with world-leading automotive electronics enterprises such as BorgWarner and Nidec, and has also secured orders from emerging automakers clients （e.g., NIO, XPeng and Li Auto） and original equipment manufacturers. At the same time, the firm has provided customers with technological solutions related to auto body domain control, auto body control, power management control, and cockpit control. We expect the shift from original equipment manufacturing to original design manufacturing to drive up the firm’s gross margin. In our view, the automotive electronics business already commands sizable market share and has visible growth prospects. The company has obtained about Rmb8.0bn backlog orders and built production bases in Shenzhen, Hangzhou, Vietnam, Italy and Romania. H&T plans to invest about Rmb400mn in the global automotive electronics operation project located in its headquarters in Shenzhen. According to the issuance plan, it will use Rmb250mn of self-raised funds in the project, including Rmb110mn for the engineering construction, Rmb75mn for purchasing equipment software, Rmb20mn for R&D resources, and Rmb45mn for employee remuneration. We believe the increased project investment will enable the firm to provide improved automotive electronics services to global clients and boost its incremental growth.
　　Plans to invest about Rmb100mn in energy storage projects. The firm intends to invest about Rmb120mn to enlarge its energy storage business （e.g., energy storage converters and battery management systems） within three years. The remaining Rmb300mn will be used as working capital, which we believe will likely support its stable growth amid mitigate macroeconomic fluctuations.
　　Financials and valuation
　　Considering macroeconomic fluctuations have weighed on downstream demand, we cut our 2022 and 2023 revenue forecasts by 3.3% and 3.2% to Rmb7.47bn and Rmb9.44bn. We leave our 2022 and 2023 net profit forecasts largely unchanged. We maintain OUTPERFORM. We are upbeat on the firm’s long-term growth potential and raise our SOTP-based TP by 5% to Rmb21 （20x 2022e P/E for intelligent controller business, 50x 2022e P/E for auto controller business, and 60x 2023e P/E for chip business）， offering 11.2% upside.
　　Risks
　　Supply shortage and rising prices of raw materials; delayed order delivery
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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。