Suzhou Chunqiu Electronic Technology Co.Ltd(603890) (603890)
Event: the company plans to publicly issue convertible corporate bonds to raise no more than 570 million yuan for the construction of “magnesium aluminum structural parts project with an annual output of 5 million sets of automotive electronics” and supplement working capital.
The business pattern of “one body and two wings” was formed, and Hefei was selected to strengthen customer demand response ability. After the completion of the convertible bond construction project, the automotive electronic structure will cooperate with the notebook computer structure and communication electronic module to form a “one body and two wings” business layout. In order to improve the overall range of new energy vehicles, lightweight is one of the most important trends. The trend of large screen and multi screen requires that the relevant structural parts have better load-bearing capacity and stability. In general, the materials of electronic structural parts of new energy vehicles should meet the characteristics of low density, high strength and good heat dissipation, This makes magnesium aluminum alloy have its place in the field of new energy vehicles.
The company has been deeply engaged in the field of structural parts for many years, has rich accumulation of magnesium aluminum process technology, and has mastered the equipment use and supporting technology in terms of “semi-solid injection molding” technology. Moreover, cutting from notebook computer structural parts to automotive electronic structural parts belongs to the “dimension reduction competition” of technology to a certain extent, and the company is expected to make a difference in the field of automotive electronics, So as to form the second driving force of performance growth.
In recent years, Hefei has focused on new energy vehicles as a strategic emerging industry, which has gathered Weilai, Jianghuai Volkswagen (Anhui), Ankai, Chang’an, Chery There are more than 120 new energy automobile enterprises such as (Chaohu) and the company’s convertible bond project is located in Hefei, which is expected to form a strong customer demand response and local supporting capacity. Brebo, the core customer of Hengjing metal materials, a joint-stock subsidiary of the company, is the braking system supplier of Tesla, Mercedes Benz, BMW and other world-famous automobile enterprises. At the same time, the company’s original electronic ODM customers are actively cooperating with major enterprises The cooperation between automobile manufacturers means that the company has a certain customer base in the field of automotive electronics, which is expected to be further strengthened in the future.
The high view of the downstream continues to consolidate revenue growth, and the marginal impact of raw material price rise on profitability is improved. As we have always emphasized in our previous reports, the global notebook computer market continues to have a high momentum. According to the statistics of strategy analytics, in the third quarter, the global notebook computer shipment increased by 8% year-on-year. However, even so, the global notebook computer manufacturing end was negatively affected by the shortage of chips and some parts, In the third quarter, the company’s single quarter revenue declined slightly year-on-year and month on month, which also affected the overall production line productivity of the company and suppressed the recovery of profitability. Fortunately, the negative impact of the rise in the price of upstream metal raw materials is gradually disappearing. In the third quarter, the company’s gross profit margin recovered to 16.55% and increased by 2.3pct month on month, Subsequently, with the stabilization of the price of metal raw materials and the alleviation of the lack of core and material, the production line productivity of the company rebounded, and the profitability is expected to continue to repair to the normal level.
The improvement of customer structure and the steady expansion of production capacity have laid the tone for sustainable growth. The company’s original notebook computer customers are mainly Lenovo. At present, the global market share of core major customers has increased steadily, and the company’s order volume has also increased steadily; At the same time, the company has expanded the top five notebook computer brand manufacturers in the world such as Dell, and the subsequent order volume of this customer is expected to climb rapidly; In addition, after China’s smart phone brands such as Huawei and Xiaomi entered the field of notebook computers, the growth rate of China’s market share is considerable: in the second quarter of this year, Huawei shipped 155000 notebook computers, the proportion of China’s market is second only to Lenovo, and domestic brand manufacturers continue to seize the market share of overseas brands in China, It has clearly driven the encroachment of the upstream supply chain on Taiwan’s competitors. The company has jointly funded and established a structural parts company, Nanchang Chunqiu, with a subsidiary of Huaqin – Shanghai Moqin. It has become a member of the domestic substitution team of notebook computers and is a clear beneficiary of this round of domestic substitution. On the whole, the optimization of customer structure has brought a sustained and stable order increment to the company, thus laying the foundation for the smooth release of new production capacity. The construction of Nanchang spring and autumn raised investment project and Lujiang phase III project is progressing steadily, and will become a profit contribution point for the company’s sustainable growth in the future.
The chairman and senior executives increased their holdings to demonstrate confidence and enhance the cohesion of the management team. On October 19, the company announced that the controlling shareholder, actual controller, chairman Mr. Xue Gewen and some core management teams planned to increase their holdings of the company’s shares, with a total amount of no less than 40 million yuan and no more than 80 million yuan. As of November 19, the increased holders established a contractual Private Equity Fund – xinchuo Xinrong No. 7 private securities investment fund as the increase subject according to the agreed shares, In addition, the company has increased its holdings of 2382200 shares (accounting for 0.54% of the total share capital of the company), with a total amount of 28.6515 million yuan. The unanimous holdings of the chairman and core executives reflect the confidence in the future development of the company and the recognition of long-term investment value, can also better enhance the cohesion of the core management team and lay a good environment for the growth of the company.
Investment rating and suggestions: maintain the buy rating. In the first half of the year, the rise in the price of raw materials and exchange losses had a slight impact on the company’s profitability. The third quarter has ushered in a clear marginal improvement. Driven by Chinese brands, ODM companies such as Huaqin and Wentai have continued to erode the Taiwan supply chain, and the company’s share in traditional brands has continued to improve, which is expected to support the company’s sustained and stable growth The extension of emerging areas such as consumption will help the company open the ceiling of long-term growth. It is expected that the net profit of the company from 2021 to 2023 will be 360 million yuan, 447 million yuan and 555 million yuan respectively. The current share price corresponding to PE is 16.00, 12.86 and 10.36 times respectively, maintaining the buy rating.
Risk tips: (1) the supply chain of notebook industry is blocked due to chip supply shortage or blocking due to the epidemic; (2) the recovery degree of global notebook industry is lower than expected. (3) the US dollar continues to depreciate unilaterally.
