Source: Yuanyu Securities

1. SASAC background, the industry is extremely scarce

Deutsche Bank World (2418.HK) listed in July 2022, when the atmosphere influence the valuation is low, the controlling shareholder is Shaanxi Automobile Group, subordinate to Shaanxi SASAC, has a typical tendency advantage in capital, customers, policy and so on. Shanqi Group is the fourth largest manufacturer of heavy trucks in China, and Deutsche World is the main player in China's commercial vehicle service industry, providing integrated value-added services for the industry. The company's leading position in the industry has won heavy cornerstone investment in the industrial chain, including sharp technology, deep ploughing of commercial vehicle safety and informatization, and the combination of strong and strong companies has the advantage of coordinated development.

The three major business segments cover the whole life cycle of commercial vehicles and are extremely scarce. the business includes: logistics and supply chain services, spare parts collection, transportation, warehousing, sorting, packing and distribution for commercial vehicle manufacturing supply chain; for spare parts suppliers, suppliers, vehicle manufacturers, vehicle shipping logistics services, new commercial vehicle transportation, transport from the manufacturer to the pick-up point designated by the customer Provide vehicle sales dealers with third-party logistics services for commercial vehicle manufacturers to arrange third-party logistics services to transport iron ore, steel and coal to the place designated by the shipper. In the aspect of supply chain financial services, it solves its practical capital turnover needs for upstream parts suppliers and middle and downstream logistics companies, and on the other hand provides high-quality car purchase finance solutions for a wide range of commercial vehicle terminal customers downstream. In terms of vehicle networking business, the default risk can be predicted in advance according to big data; it can also rely on the industry-leading MD5 remote vehicle locking technology to remotely lock the defaulted vehicles in accordance with the service agreement to ensure the safety of supply chain financial services assets.

Second, the pattern of large industries and small companies, leaders have broad prospects for development.

According to Sullivan data, the market size of the whole industry chain service market of commercial vehicles in China will reach 953.5 billion yuan (RMB, the same below) in 2021, and is expected to reach 1.33 trillion yuan by 2026. As China's commercial vehicle logistics and supply chain service industry as a whole is highly dispersed, and most of them are small and medium-sized enterprises, the industry has a high potential for expansion. Deutsche Bank has inherent advantages and is expected to further expand the size of the business sector and increase its market share in the future.

Third, the improvement of profitability and continuous investment in research and development

Since 2019, the company has maintained stable revenue and sound profitability. In the first half of this year, the group achieved revenue of about 1.5 billion yuan, an increase of 6.2% over the same period last year, of which the logistics and supply chain services sector accounted for 77.7% of the total revenue, and the revenue was about 1.18 billion yuan, an increase of 15.2% over the same period last year. Between 2019 and 2021, Deutsche Bank's gross profit margin rose significantly for three consecutive years. From 2022 to the end of June 2023, the gross profit margin is affected by the environmental factors of the epidemic, but as the overall situation stabilizes, the gross margin is expected to improve gradually. In fact, the company attaches great importance to R & D investment. From 2019 to 2022, the compound growth rate of total R & D expenditure reached 19.71%. It is worth noting that the compound growth rate of technical service fees is as high as 57.73%.

IV. Commercial vehicle market sees recovery

In the first half of the year, the company provided vehicle manufacturing supply chain services for about 57000 commercial vehicles, and provided vehicle shipping logistics services for about 33000 commercial vehicles, an increase of 62.39% and 18.41% respectively compared with 35000 and 28000 vehicles in the first half of 2022. The overall business obviously recovered after the epidemic. According to the latest data from the China Automobile Association, the production and sales of commercial vehicles completed 300000 and 310000 respectively in August, up 5 per cent and 7.9 per cent respectively from the previous month, and 26.2 per cent and 20 per cent respectively from a year earlier. From January to August, the production and sales of commercial vehicles totaled 2.553 million and 2.568 million, up 18 percent and 16.4 percent respectively over the same period last year. Among the main types of trucks, compared with the same period last year, the production and marketing of the four types of trucks are different, among which the growth rate of production and sales of heavy trucks is more obvious. The overall production and sales of commercial vehicles in China is satisfactory, and it is expected that the mainland will further benefit from the sustained economic recovery in the mainland.

Fifth, the rapid development of vehicle networking, taking advantage of the trend of digitization and intelligence.

Deutsche World owns the background heavy commercial vehicle networking platform of the largest commercial vehicle manufacturer in China. Around the commercial vehicle industry chain to build a wealth of application scenarios, a wide range of coverage to promote data applications and services. With the acceleration of the development of 5G, autopilot, new energy and digital economy, the development of vehicle networking has been paid attention to, and the industry has accelerated its expansion. In 2019-2021, business income has grown at a compound annual growth rate of 35.3%. Giving full play to the advantages of big data's ability is expected to enhance the profitability of the company's business in an all-round way.

VI. Investment logic

1. Commercial vehicles are fully covered by the whole industry chain and are extremely scarce.

2. The market scale of the whole industry chain service market of commercial vehicles in China is large.

3. The company's operating income has improved steadily, the gross profit margin has increased for three consecutive years, and attaches great importance to R & D investment.

4. China's commercial vehicle industry is expected to recover.

5. The background of state-owned assets helps, cornerstone investment, with the advantage of coordinated development.

6. The rapid development of car networking, taking advantage of the trend of digitization and intelligence.