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Huawei's automobile circle, which is far ahead, has added another big man.
On November 25th,Changan Automobile (000625).The official announcement was that it signed a memorandum of investment with Huawei. The two companies will cooperate to establish a company engaged in the research and development, design, production, sales and service of automotive intelligent systems and component solutions, and claim to be a leader in the automotive intelligent systems and components solutions industry.
As soon as this news comes out, as long as it is related to Chang'an, it will be red**. Among them, the most out of the circle is the good brother-Dongan Power(600178) (The controlling shareholders of Changan Automobile and Dongan Power are both China Changan Automobile Group*** Although honest Dongan Power continues to "refute rumors" that the cooperation project between Changan Automobile and Huawei has nothing to do with the company, the company's stock price is still happy to rise for seven consecutive boards.
*: Oriental Fortune Network - Dongan Power (as of December 1, 2023).
Although the stock price is strong, the performance is not satisfactory.
1. The once fragrant gluttony, the little garbage at the moment
Dongan Power is an enterprise mainly engaged in automobile engines and transmissions. The 2022 annual report (the 2023 semi-annual report does not disclose specific product data) shows that in the whole year of 2022, the proportion of engine and transmission revenue is respectivelywith, almost for the East Ministry of Security income**.
*: Straight flush.
And these two parts of the business, from the once popular fried chicken, to everyone.
Twenty years ago, Chinese cars were not very famous. Core production technologies such as engines have to be imported. With its innate advantages, Dong'an became a favorite in the automobile circle at that time.
So, what are the specific advantages?
In fact, today's Dongan Power was originally a business spun off from Harbin Dongan Engine Manufacturing Company (hereinafter referred to as "Dongan Manufacturing"). One of the shareholders of Dongan Manufacturing is Mitsubishi of Japan. You can imagine how popular Japanese cars were back then. Relying on the 4G1 series, 4G9 series, 4G1MIVE series and other engine products imported from Mitsubishi and the F5M41 transmission, Dongan became a popular fried chicken in the automobile circle that year.
But since then, Dongan has been immersed in Mitsubishi's technology, and there is a clear lack of attention in independent research and development and innovation. In recent years, although R&D investment has increased, the proportion is onlyAround. Walking is like sailing against the current, and if you don't advance, you will retreat, so it is common sense that Dong'an is abandoned by the market.
*: Collation of public data.
The data shows that although domestic cars are developing rapidly, Dongan's business is tepid. In recent years, the overall sales of core products such as engines have shown a downward trend. In 2022, the sales volume will be about 510,000 units, compared with 760,000 units in 2016, a significant decline, as if it has changed from fried chicken to "small garbage".
*: Straight Flush iFind – Sales.
Second, reorganization, can you save yourself?
With this happening, Dongan began to work hard to save himself.
In 2021, Dongan and Dongan Manufacturing will be restructured and integrated. Under the background of carbon peaking and carbon neutrality, Dong'an aims at Dong'an's manufacturingNew energy drivetrainsbusiness in order to save itself (public data shows that the main business of Dongan Manufacturing is automobile engines, transmissions and new energy power transmission systems).
Although, in 2021, Dongan Power's revenue has jumped, can 1+1 really be greater than 2?In the author's opinion, it is not necessarily true.
*: Straight Flush iFind - operating income.
1 Although the new energy is hot, it is also very volatile.
Driven by national policies, the automobile industry as a whole has shown structural adjustment. Both traditional car companies and new car-making forces have poured into the new energy track, resulting in a serious involution in the new energy vehicle industry. **Frequent wars are the best ironclad evidence.
If the whole vehicle fights the best war, the profits of upstream parts will be squeezed. The data shows that since 2021, although Dongan Power's revenue has jumped, its gross profit margin has declined.
*: Straight Flush iFind – Gross Margin.
2 The competitiveness of Dong'an's new energy products is not optimistic.
Downstream involution, not only the upstream is not profitable, but also tests the competitiveness of the product. But can Dong'an's product competitiveness get a piece of the pie?
For Dong'an's products in new energy, the public should be most familiar withIdeal one12T3-cylinder range extender (the engine of Li Auto's first car). Market information shows that the reason why Ideal chooses Dong'an is also the second choice. First of all, ideals cannot be created by themselves;Secondly, the procurement from Chery and others failed.
And judging from the feedback of the whole vehicle, it is not ideal. The most intuitive feedback is that the noise and vibration are very high. Market feedback shows that the ideal is to use it as a range extender, and after a number of sound insulation and shock absorption measures, the noise and vibration are still very large, otherwise the effect can be imagined. Although Dong'an is still among the ideal businessmen, if the product is not good, everything is afraid that it will be empty talk.
The market is overheated, and the competitiveness of its own products is not strong. Data shows that since 2021, Dongan's revenue has also begun to decline.
*: Straight Flush iFind - operating income.
Third, its own hematopoiesis is insufficient, and the financial pressure is huge
The business declined, the gross profit declined, and in the third quarter of 2023, Dongan's net profit margin was only left, not even 1%. Profit margins are pitiful, and cash flow is even more pitiful. In the first three quarters of 2023, Dongan's operating cash flow became the first "negative" in recent years.
*: Straight Flush iFind – Cash Flow Statement.
Self-hematopoietic insufficiency, Dong'an'sCash is under pressure
The data shows that in the past two years, Dongan's quick ratio (an indicator of short-term solvency, which is usually more reasonable than 1) has declined significantly, and liquidity has been tight.
*: Straight Flush iFind – Quick Proportion.
Because of this, Dongan is in full swing to raise external funds (**additional issuance).
Although Dongan issued additional shares to its controlling shareholder China Changan and strategic investor Foton Motor, in the face of such unsatisfactory performance, the CSRC still required it to give detailed explanations and explanations on the decline in business, deterioration in profitability and deterioration in cash flow.
*: Announcement of the company on August 9, 2023.
In the face of such performance, I don't know if Dong'an's financing road can be smooth.
Note: This article does not constitute any investment advice. **There are risks, and you need to be cautious when entering the market. There is no harm in buying and selling.