Zhixin Electronics (837212)
Zhixin electronics focuses on connector cable components. The company’s products focus on the field of consumer electronics and continue to expand the field of automotive electronics. It has formed long-term and stable cooperative relations with well-known enterprises at home and abroad, such as Goertek Inc(002241) , Gettopacoustic Co.Ltd(002655) , Xiatian industry, Japan Sony and so on. From 2017 to 2020, the CAGR of the company’s revenue and net profit were 20.92% and 20.82% respectively. In the first three quarters of 2021, the company’s total revenue was 346 million yuan, a year-on-year increase of 45%, and the net profit was 48 million yuan, a year-on-year increase of 55.15%.
China is the world’s largest connector market, and the industrial chain continues to transfer to China. According to the report of bishop & Associate, the global connector market will reach US $62.727 billion in 2020 and is expected to increase to US $67.122 billion in 2021. Among them, China’s share has increased from 26.13% in 2015 to 32.2% in 2020. The global connector market will exceed US $90 billion in 2023. According to the market share of 32.2%, China’s connector market will reach US $28.98 billion.
1) automotive electronic connectors will continue to be in high prosperity. The driving factors are the electrification and intellectualization of vehicles: in the direction of electrification, the penetration rate of Shanxi Guoxin Energy Corporation Limited(600617) vehicles has gradually increased, and the sales volume will reach 2.99 million in 2021. According to the estimate of Dongguan Dingtong Precision Metal Co.Ltd(688668) prospectus according to the value of 4000 yuan per vehicle, the market scale of Shanxi Guoxin Energy Corporation Limited(600617) vehicle connectors will reach 12 billion yuan in 2021; In the direction of intelligence, according to the prediction of xinsijie Industrial Research Center, with the popularization of automatic driving and the improvement of automatic driving level, the market scale of China’s vehicle high-speed connector is rising, which is expected to reach 14.5 billion yuan in 2025.
2) consumer electronic connectors are expected to grow steadily. With the integration of 5g, Internet of things, artificial intelligence, virtual reality, new display and other technologies with consumer electronic products, product renewal and iteration will be accelerated. In this context, the demand for consumer electronic connectors will maintain steady growth and continue to develop to high-frequency, high-speed and miniaturization.
3) the development of connector cable assembly is synchronous with that of connector, and there is a strong demand for localization. According to the estimation of automobile sales volume predicted by Zhixin electronic announcement and automobile industry association, the scale of automobile cable components in China is expected to reach 77.2 billion yuan in 2022. With the increase of the penetration rate of electrification and intelligence, the number and value of connector components will increase. For a long time, high-end automobile connecting components have been monopolized by Tyco, Yazaki and other foreign companies, with high price, long supply cycle, large capacity fluctuation and strong demand for localization. China’s leading connector manufacturers such as Suzhou Recodeal Interconnect System Co.Ltd(688800) will produce some components accordingly, and some harness manufacturers such as Dadi Electric will also expand to connector cable components.
The company continues to consolidate the business foundation in the field of consumer electronics, and at the same time, layout fali automobile electronic cable components. 1) Consumer electronics: stable customer resources and rapid technical response. The company and goer group are located in Weifang. Since 2006, the two sides have cooperated and selected suppliers for it. Goer group is the largest customer of the company from 2018 to 2020; The company cooperates with Sony and Nintendo in the game console industry. In 2020, the cable components of consumer electronic connectors used in Nintendo’s switch game console accounted for 71.88% of its total demand. 2) Automotive electronics: make efforts to expand the field of new energy and intelligence. The company has become a direct and indirect supplier of more than ten automobile manufacturers, and established cooperative relations with high-quality customers such as Autoliv, the world’s largest manufacturer of “automobile occupant protection system” in 2020. In the field of new energy: in early 2020, it began to realize mass production and supply to Geely Automobile, realize revenue, and become the first-class supplier of electronic connector and cable components for battery supporting of new energy vehicles. Intelligent field: the company focuses on the development of high-speed data transmission cable components. Fakra and HSD harness have reached the mainstream level of the industry, and continues to research and develop new fakra harness, HFM and other directions; Adas cooperates with FAW.
Continue to invest in R & D and face the future. 2022 will usher in large capacity. 1) Multi faceted research and development to enhance the competitiveness of the company’s products. The company has 2 invention patents, more than 40 other patents and 3 software copyrights, and has invested 32.5459 million yuan in the construction of R & D center to broaden the company’s product coverage in the fields of automotive electronics and artificial intelligence. As of April 2021, the company has 11 projects under research. The upgrading of existing products and production processes by the new farka harness, high-frequency coaxial harness and other projects will improve the competitiveness of products. The harness of intelligent comprehensive medical bed and other projects will expand the extension of the company’s products in the direction of electronic equipment, medical devices and intelligent wear. In addition, the company will gradually deploy injection molding and stamping technology, and will cultivate the self-production capacity of high-end connectors in the future. 2) The production capacity of raised investment projects matches the growth of the company. The raised investment project is expected to release the production capacity of 40 million consumer electronics and 14.72 million automotive electronic connector and cable components, and the new production capacity is expected to be released in the second half of 2022. According to the prediction of the prospectus, the average annual net profit after tax after reaching 29.8208 million yuan.
The total operating profit of the parent company is expected to be rmb8.8 billion / 2023.07 billion and the net profit of the parent company is expected to be rmb8.8 billion / 2023.07 billion / 2020 respectively, with the net profit of the parent company’s diluted investment of Rmb7.8 billion / 2023.06 billion and the net profit of the parent company’s diluted investment of Rmb7.8 billion / 2020 respectively. The current share price of the company predicts that the PE multiples of EPS from 2021 to 2023 are 28 / 22 / 19 times respectively. With reference to the valuation of comparable companies and considering the high growth brought by the continuous prosperity of the industry, the company gives a “overweight” rating for the first time.
Risk tips: 1) the development of automotive electronics is less than the expected risk. 2) The risk of intensified industry competition. 3) Risk of high customer concentration. 4) The progress of the company’s raised investment projects is less than the expected risk. 5) The public data used in the research report may have the risk of information lag or untimely update.
