Sichuan Tianyi Comheart Telecom Co.Ltd(300504) (300504)
1. After 20 years of deep cultivation of communication equipment, the volume of new products driven by R & D is expected to drive performance growth
Sichuan Tianyi Comheart Telecom Co.Ltd(300504) based on the field of optical communication and mobile communication, its main products are communication equipment such as broadband access and intelligent networking equipment. Adhering to innovation, the company continued to increase R & D investment, launched 10g PON, wi-fi6 and other new products, and realized batch shipment of the first two products, driving the growth of the company’s performance.
In 2020, the company achieved an overall operating revenue of 1.906 billion yuan, a year-on-year decrease of 10.83%, mainly due to the delay in resumption of work and production affected by the epidemic in the first half of the year and the decline in customer demand. In the first three quarters of 2021, with the gradual increase in the sales proportion of wifi6 wireless router and 10g PON products, the company returned to the track of performance growth, realizing an operating revenue of 1.72 billion yuan in 2021q3, an increase of 22.10% over the same period of last year; The net profit attributable to the shareholders of the listed company was 146 million yuan, an increase of 43.49% over the same period last year.
2. Demand side: the proportion of 10G PON purchased by operators increased, and the demand for wi-fi6 performance increased
① 10g PON equipment: combing the history of PON equipment purchased by operators, it can be found that the procurement ratio of GPON products and 10g PON has changed. In the centralized procurement of newly-built PON equipment from 2022 to 2023, China Mobile has purchased all 10g PON related equipment. Globally, in the first quarter of 2021, 10g PON OLT port shipments reached 1173000, a year-on-year increase of 76%.
② Wi-fi6: in the future smart home, smart car, VR \ AR and other applications, the demand and performance requirements of Wi Fi will be greatly improved. In 2019, wi-fi6 standard was launched, and a number of new technologies such as MU-MIMO and OFDMA were adopted to improve the performance. Wi-fi6 has higher performance parameters. Based on this, in 2020, the bidding for Wi Fi 6 by operators was kicked off, China Telecom Corporation Limited(601728) and China Mobile purchased 14.326 million sets and 10 million sets of Wi Fi 6 gateways respectively. According to IDC’s prediction, Wi Fi 6 will continue to expand its market share in 2021, and the Chinese market will be close to US $470 million.
3. Continuous research and development to maintain product competitiveness, new products bring new era and new opportunities
First, strategically, the company actively invests in R & D resources. The company’s R & D investment is growing as a whole, accounting for 6.13% of the main revenue in 2020, and the proportion of R & D personnel has increased from 12.89% in 2018 to 18.35% in 2020. Under continuous research and development, the company achieved product achievements in key areas and launched 10g PON products, wi-fi6 products and 5g small base station products. At the same time, the company has also become the first WiFi 6 router manufacturer with supply qualification in the communication operator system, with the first mover advantage.
Secondly, the company has in-depth cooperation with operators in the market. In the past year, the company has won many bidding for the procurement projects of operators’ home gateway, router terminal and other products, driving the growth of performance. The capital expenditure of operators is expected to remain high. The estimated capital expenditure of China Mobile, China Telecom Corporation Limited(601728) and China United Network Communications Limited(600050) in 2021 is 180.6 billion yuan, 87 billion yuan and 70 billion yuan, The company will benefit from the continuous investment and construction of operators.
Finally, in terms of products, the company has insight into the defects of the current home networking mode and puts forward the whole house optical network scheme to create new value for users. At the same time, it will also drive the demand of the company’s optical cat and gateway equipment and drive performance growth.
Profit forecast and investment suggestions:
The company has been deeply involved in the optical communication market for many years, and important orders from operators continue to land. Benefiting from the construction of Gigabit broadband by operators, the continuous promotion of smart home, and the continuous improvement of the value of network equipment brought by new technologies such as Wi Fi 6, the company’s business has continued to grow rapidly. It is estimated that the net profit attributable to the parent company in 21-23 years will be 160 million yuan, 200 million yuan and 260 million yuan respectively, corresponding to 32 times, 26 times and 20 times PE in 21-23 years With reference to the 21-year average p / E ratio of comparable companies in the same industry, the corresponding target price is 22.10 yuan, and the rating of “overweight” is given for the first time.
Risk tip: wi-fi6 promotion is not as expected; Fierce competition in the industry and the risk of price decline; The price rise of upstream chips and raw materials affects profitability; The order execution progress is lower than expected, etc
