What's new

Aotecar New Energy Technology announced that its subsidiaryNanjing Aotecar has become the electric compressor supplier toFAW Volkswagen’s alternative-fuel vehicle （AFV） models. It willsupply electric compressors to FAW Volkswagen’s fiveMQB-based electric vehicle models to be launched from 2018.

Comments

Expanding presence of electric compressor businessinto VW supply chain; further progress in replacing JVbrands. In 2016, the market share of Nanjing Aotecarexceeded 50% among suppliers to domestic automakers andwas around 38% among suppliers to AFV producers. Theorder from FAW Volkswagen is a breakthrough for thecompany’s electric compressor business to expand into thesupply chains of JV automakers.

Nanjing Aotecar, Foton Automotive Air Conditionerand Air International may continue producingsynergies.

Aotecar to benefit from launches of AFV models inChina by JV automakers.

See page 3 for details.

Valuation and recommendation

Details of the order have yet to be disclosed and it will take sometime for production to ramp up after new models are launched.

Thus, we maintain our net profit forecasts at Rmb500mn in 2017and Rmb547mn in 2018 （excl. acquisitions）。 Maintain BUYrating and TP of Rmb15.0, implying 33.3x 2017e P/E.

Risks

Sector-wide slowdown.