What's new
We hosted post-results NDR for Tianneng power in Hong Kong andBeijing.
Comments
Steadily gaining market share in e-bike/tricycle batteries. Tiannengrecorded Rmb21.7bn in revenue from e-bike/tricycle battery sales in2017, up 27% YoY. Total shipments hit 193mn units in 2017, up 7%YoY. According to IPSOS, Tianneng’s market share gained 2ppt to 42%in by the end of 2017.
Upside in waste battery recycling utilization. Tianneng recordedRmb1.5bn in revenue from waste battery recycling in 2017, up 56%YoY. As of the end of 2017, total recycling capacity is 400k tons （100kin Henan and 300k in Zhejiang）。 According to management, utilizationin 2017 was 70% and could further grow in 2018.
Broadening lithium battery client base. Revenue from lithiumbatteries was Rmb1.22bn （+98.68%）， motivated by the sharp increasein domestic EV car sales （+51% YoY）。 The new 3GWh lithium batteryline has gone into production. Further, Tianneng has successfullybroadened its client base to various well-known new-energy automakers in China, including Chery, Kandi, Lifan Motor, Zotye, Brilliance,and Nanjing Golden Dragon Bus, which can help provide robustrevenue support in the future.
Valuation and recommendation
We maintain our 2018 & 2019 earnings forecasts. Tianneng is tradingat 6.6x 2018e or 5.3x 2019e P/E. We expect lead-acid battery andrecycling businesses to drive steady earnings growth over 2018–19.
We maintain a BUY rating because of the stable growth outlook andattractive dividend yield, and raise our TP by 20% to HK$12.00 basedon 8x 2018e P/E.
Risks
Raw material prices more volatile than expected.