Tianneng (819.HK): The Recycling business is expected to become a new profit growth point June 27, 2018

Investment Summary

Tianneng Power is a leading enterprise in China`s lead-acid power battery industry. We believe that the Company`s lead-acid battery business will continue to maintain its stable growth characteristics and become the Company`s “cash cow” business. Its recycle business revenue CAGR growth in future is expected to reach 50%. The company is the leader in the field of lead-acid batteries and has a sound financial position. Its new business forward plan is clear and pragmatic. We believe that a certain valuation premium should be given. We expect the company`s EPS for 2018/2019 to reach 1.196/1.451 yuan and the target price of HK$14.7, corresponding to 2018/2019 10/8.2x P/E. (Closing price as at 25 June 2018)

Company Profile

Tianneng Power is a leading enterprise in China`s lead-acid power battery industry. Founded in 1986, the Company entered the lead-acid power battery field for electric bicycles and launched the “Tianneng” brand in 1998. In 2004, it began to engage in the R&D and production of lithium batteries. After over three decades of development, the Company has become a new energy high-tech enterprise that integrates electric vehicle power battery, wind energy solar energy storage battery, and battery recycling and other businesses, establishes its mature sales channel, and steadily increases its market share. Its market share of lead-acid battery industry is 42%, and the total market share of lead-acid power battery industry of the Company and Chaowei Battery exceeds 80%, forming an industry duopoly pattern.

About the author

Profile photo of Zhang Jing

Zhang Jing
Phillip Securities (HK)

Bachelor Degree in Tongji University of Engineering; Master Degree in East China Normal University of finance. Currently covering the automobile and air sectors. She has years of experience in investment research and is good at combining analysis for the companies with industry prospects.

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