20171130-三星证券-No_need_to_put_off_accumulation_12页_1mb

Hanon Systems Summary

Core Content

Hanon Systems (018880) is a key player in the automotive climate control industry, particularly in the emerging xEV (extreme electric vehicle) market. The company is recognized as the world's third-largest e-compressor supplier and has a strong position in thermal management technologies, including battery cooling and heat pump systems. With the implementation of China's NEV (new energy vehicle) quota in 2019, the company is expected to benefit significantly from the growth in xEV production and demand.

Main Points

• Valuation and Target Price: The current price is KRW13,350, and the target price is KRW16,500, reflecting a 17.9% increase from the current price. This is based on an adjusted P/E multiple of 22x, which is raised from previous estimates.
• Market Cap and Shares: The company has a market cap of KRW7.1t/USD6.6b and a float of 533,800,000 shares.
• Industry Position: Hanon is a part of a global oligopoly and has a 14% market share in the e-compressor market. It serves major clients, including Hyundai Motor and Kia Motors, and is the exclusive vendor for HMC's e-compressors.
• xEV Growth: The xEV-related portion of sales surged by 82.7% year-over-year in the first half of 2017, reaching KRW190b or 6.7% of total sales. The company is expected to see its e-compressor capacity reach 2 million units by 2020, with a market share increasing to 35%.
• M&A Trends: The automotive industry is experiencing a surge in M&A activity, with Hanon being an attractive target due to its technology and market position. It could be acquired by IT giants or Chinese firms looking to expand their presence in the xEV market.
• Sales Forecasts: HMC and Kia are projected to see a significant increase in xEV sales, from 224,000 units in 2017 to 703,000 units in 2019. Hanon is expected to benefit from this growth.
• Key Financials:
  • Revenue is projected to grow from KRW5,704b in 2016 to KRW6,615b in 2019.
  • Net profit is expected to increase from KRW304b in 2016 to KRW404b in 2019.
  • EPS is forecasted to rise from KRW547 in 2016 to KRW729 in 2019.
• Valuation Metrics:
  • P/E ratio is expected to decrease from 24.4x in 2016 to 18.3x in 2019.
  • P/B ratio is projected to decline from 3.9x in 2016 to 3.1x in 2019.
  • EV/EBITDA ratio is anticipated to drop from 12.2x in 2016 to 9.0x in 2019.
• Dividend Yield: The dividend yield is expected to increase from 1.7% in 2016 to 3.7% in 2019, indicating a growing focus on shareholder returns.
• M&A Activity: Hanon has been a target for several automotive M&A deals, with its P/E multiple reaching a new high after the Dieslegate event in 2015.

Key Information

• 2017E EPS: KRW580, with a 0.0% change from the previous year.
• 2018E EPS: KRW664, with a -1.2% change from 2017E.
• Target Price: KRW16,500, with a 17.9% increase from the current price.
• Dividend Yield: Expected to rise to 3.7% by 2019.
• P/E Ratio: Increased to 24x in 2015, and is projected to reach 22x in 2018-2019.
• xEV Market Growth: Hanon is well-positioned to benefit from the growth of xEVs, with new orders expected to increase significantly before the 2019 NEV quota enforcement.
• Strategic Partnerships: Hanon has established a joint venture with the Changan Group in China, which is expected to bring in more orders from local automakers.
• Industry M&A: Auto parts makers are seeing increased M&A activity, with Hanon being a potential target for companies seeking to expand their xEV capabilities.

Summary

Hanon Systems is poised for growth as the xEV market expands, especially with the enforcement of China's NEV quota in 2019. The company has a strong market position and is an attractive target for potential acquisitions due to its advanced technology and global client base. Financial metrics show a positive outlook, with increasing revenue, net profit, and EPS. The company is expected to see its P/E ratio peak in 2019, making it an ideal time for accumulation. With a focus on shareholder returns through dividends and a strong balance sheet, Hanon Systems is well-positioned to benefit from the ongoing transformation of the automotive industry.