\u3000\u3 Guocheng Mining Co.Ltd(000688) 159 Shenzhen Neoway Technology Co.Ltd(688159) )
1. The strong force in the old Internet of things industry has seen a high increase in revenue. We look forward to the inflection point of performance
The Internet of things communication field is deeply cultivated and covered by many vertical fields Shenzhen Neoway Technology Co.Ltd(688159) b was established in October 2006 and listed in 2020. The company’s main business is the R & D, production and sales of Internet of things wireless communication modules, Internet of things wireless communication terminals and Internet of things wireless communication solutions. Its products cover many vertical fields, such as smart energy, Internet of vehicles, etc.
In 2020, the company achieved an overall operating revenue of 574 million yuan, a year-on-year decrease of 26.66%, mainly due to the impact of the epidemic, the reduced demand for overseas vehicle networking terminals and China power grid products, and the delivery of orders on hand in the fourth quarter was affected by the shortage of chips. In the first three quarters of 21 years, the company’s operating revenue returned to the growth track, realizing an operating revenue of 685 million yuan, a year-on-year increase of 58.52%. In terms of net profit, the company realized a net profit attributable to the parent company of -75.06 million yuan in 2020, with a sharp year-on-year decrease of 237.58%, mainly due to the decline of the company’s revenue and increased investment in R & D and sales. In the first three quarters of 21 years, the company’s net profit increased year-on-year, but there was still a small-scale loss (- 10.31 million yuan). The company released the performance express for 2021. It is expected to achieve an annual revenue of 1.029 billion yuan, a year-on-year increase of 79.33%, and a net profit of – 5 million yuan. The overall performance shows a trend of rapid development and profitability repair. We believe that with the improvement of the epidemic situation and the optimization of the company’s product structure, the company’s operation will gradually improve and its future development can be expected.
2. The Internet of things has a broad application space, and the prosperity of the industry drives the demand for communication modules
The scale of the Internet of things market exceeds trillion, and there is still broad market space in the future. At present, the scale of China’s Internet of things market has exceeded RMB 2 trillion, with a year-on-year growth rate of more than 20%. At the same time, IDC predicts that the global Internet of things market will reach US $1.1 trillion in 2025, and the industry has broad space. Specifically:
① Internet of vehicles market. From the perspective of market scale, IHS predicts that there will be 350 million connected vehicles in the world in 2022, and the penetration rate of 24% is still low. In the future, with the continuous penetration of intelligent driving / vehicle networking, the demand for on-board communication modules is expected to accelerate. According to our calculation, the market scale of vehicle module is expected to increase from 7.9 billion yuan in 2020 to 23.6 billion yuan in 2025, with a compound growth rate of 24.5%.
② charging pile market. The rapid growth of new energy vehicle sales has driven the acceleration of charging pile construction in various regions. It is estimated that the number of high-speed service areas, public transport and public charging piles will be about 1.53 million in 2025 compared with the current construction. The charging point is equipped with communication module, which can be cat 1 / LTE module for data transmission.
③ smart grid. China’s smart grid construction has entered a new energy transformation period. The State Grid / China Southern Power Grid have issued plans for digital and intelligent construction. The demand is expected to grow with the enabling of communication modules for meter reading and distribution network monitoring.
④ photovoltaic inverter. China’s photovoltaic installed capacity has increased again, with a new installed capacity of 48.2gw in 2020, an increase of 60% year-on-year. At the same time, the new / replacement market of photovoltaic inverter is developing rapidly, and the inverter is equipped with communication module to drive the demand.
⑤ laptop market. The laptop module will benefit from the increase of penetration rate and quickly open up the market space. Based on the calculation that the penetration rate will increase to 20% in 2025, the market scale of laptop cellular communication module will reach 5.582 billion yuan by 2025.
3. Technology + channel + customer + price advantage helps the company grasp new opportunities under the tide of the times
First of all, the company continues to increase its R & D in technology. In 2020, the company’s R & D investment accounted for 15.24% of its operating revenue, leading its peers. In addition, the company has a number of research projects to ensure continued strong technical competitiveness. At the same time, due to the continuous investment in R & D, the company’s products have certain first mover advantages to help market development.
Secondly, in terms of channels, the company has actively arranged the global marketing network and established a marketing network covering the markets of Europe, America, India and Southeast Asia, which has enabled the company’s product sales to grow. Among them, the compound growth rate of the sales of wireless communication modules from 2016 to 2020 is 30.09%. Due to the small base, the wireless communication solutions have shown rapid growth in the past two years.
Thirdly, with more than ten years of deep cultivation in the industry, the company has accumulated strong brand influence and has leading enterprise customers in many vertical fields, including State Grid / South Grid in the field of electric power, GAC and Dongfeng in the field of Internet of vehicles, etc.
Finally, compared with overseas competitors, the company has a price advantage, which is conducive to maintaining and developing overseas market share. At the same time, the company actively controls the comprehensive cost, significantly reduces the procurement cost of single products, and ensures the profitability of the company.
We believe that the company’s strong competitive advantages in the four dimensions will enable the company to seize the industry opportunities in the era of Internet of things, help the company’s performance grow continuously, and become one of the leading enterprises in the field of Internet of things communication.
Profit forecast and investment suggestions: the company is one of the leading enterprises in the Internet of things module industry, and will fully benefit from the prosperity development of the industry and the growth of downstream application demand in the next few years. Taking smart grid as the basic business, the company continues to expand the high boom track. At the same time, the company expands cloud tube end products, enriches product services and is expected to improve profitability. We expect the operating revenue of the company from 2021 to 2023 to be RMB 1.029/16.02/2.222 billion respectively, and the net profit attributable to the parent company to be RMB -0.05/0.90/135 billion respectively. With reference to the valuation of comparable companies in the same industry, based on 35 times PE in 22 years, the corresponding target price is 34.42 yuan. For the first time, give a “overweight” rating.
Risk tips: the risk that upstream raw materials continue to maintain high prices, the risk that the delivery will be prolonged due to the shortage of upstream chips, the risk that the R & D of new technologies is not as expected, the fierce market competition, the decline of profitability and other risks
