\u3000\u3000 Suzhou Hengmingda Electronic Technology Co.Ltd(002947) (002947)
[key investment points]
On February 22, 2022, the company released its 2021 annual report. In 2021, the annual revenue was 1.13 billion yuan, a year-on-year increase of 75.6%, and the net profit attributable to the parent was 31.264 million yuan, a year-on-year decrease of 70.2%. After deducting the expenses due to the equity incentive plan, the net profit attributable to the parent was 120 million yuan, a year-on-year decrease of 1.2%. In the fourth quarter of 2021, the revenue was 460 million yuan, an increase of 85.7% year-on-year and 51% month on month. The net profit attributable to the parent company in the fourth quarter was 50.97 million yuan, a significant increase of 115.9% year-on-year. The net profit attributable to the parent company in the fourth quarter doubled month on month after month after month. The performance of the company in 2021 was in line with the previous performance forecast range of the company, exceeding our previous expectations.
The company’s mobile phone products had a revenue of 390 million yuan in 2021, a year-on-year increase of 138%, and the corresponding mobile phone products had a revenue of 320 million yuan in the second half of 2021, a year-on-year increase of 186%. With the mass production of new products from supporting downstream customers, the business scale of mobile phone products has increased significantly, and the gross profit margin has remained above 20%. As the downstream shipments are affected by the tight supply of materials, the revenue of tablet products in 2021 is 210 million yuan, a slight increase of 3% year-on-year, and the gross profit margin is stable at more than 40%. The revenue of watches and other functional devices in 2021 was 250 million yuan, with a year-on-year increase of 46%, corresponding to the revenue of 180 million yuan in the second half of 2021, with a year-on-year increase of more than double. There are a wide range of downstream products, including smart watches, TWS headphones, laptops, etc. at the same time, we actively expand other types of smart products, and the gross profit margin of the business segment remains at about 35%. The revenue of communication cabinet business in 2021 was 250 million yuan, with a year-on-year increase of 177.3%. After the acquisition of huayangtong Electromechanical, the company will give full play to the advantages of precision manufacturing and vertical integration, and the growth of business will also benefit from the continuous upgrading of 5g network infrastructure.
In 2021, with profound technological accumulation and outstanding innovation level, the company deeply participated in the R & D and design of customers’ new products, and the number of proofing has tripled compared with that in 2020. In the R & D process, the company attaches importance to the process optimization and intelligent upgrading of the production line. Among them, the automatic detection equipment independently developed and transformed by the company combined with advanced algorithms can flexibly adjust parameters according to different models and delivery standards of various non-standard products, greatly improving the product yield and effectively realizing excellent cost control. Focusing on the growth of its own hard power, the company has strengthened and polished its professional technology in the field of consumer electronic functional devices, precision structural parts and other products by deepening cooperation with end customers in multiple product dimensions, and has made some progress in the market share of its main business. At the same time, the company has actively deployed new energy, medical equipment and other fields, and the existing products have entered the stage of proofing and sample delivery, and the strategic expansion has achieved remarkable results.
[investment advice]
It is estimated that the company’s revenue from 2022 to 2024 will be 1.323, 1.767 and 2.242 billion yuan respectively, the net profit attributable to the parent company will be 243, 335 and 417 million yuan respectively, and the EPS will be 1.38, 1.90 and 2.37 yuan / share respectively, corresponding to 24, 17 and 14 times of the current PE respectively. The company’s growth and profitability are better than the industry average. With reference to the past PE median level of the company and industry comparable companies, the company is given a price earnings ratio of 35 times in 2022, the target price is maintained at 48.6 yuan, and the “buy” rating is maintained.
[risk tips]
Lifting the ban on shares: the company issued non-public shares in September 2021 and will lift the ban on March 8, 2022, accounting for 9.89% of the total share capital.
New product introduction and new business expansion were not as expected
Weak consumer electronics market demand: weak market demand leads to lower than expected terminal shipments
The tension of the upstream semiconductor supply chain has intensified: the supply tension pattern of the upstream supply chain represented by chips has intensified. On the one hand, the delivery cycle affects the downstream shipments, on the other hand, the rising cost depresses the overall profit space.
The production expansion progress is lower than expected: in 2021, the company established Huizhou huayangtong and plans to purchase Huizhou industrial land to expand the business scope of 5g communication. The lower progress will affect the business expansion of this part of the company.
The sharp fluctuation of exchange rate has a certain impact on the company’s production and operation.
