\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 79 Electric Connector Technology Co.Ltd(300679) )
Investment logic
The company is the leader of mobile phone RF connector in China, with both R & D advantages, manufacturing advantages and customer advantages. At the R & D end, the company has 21 invention patents, and the R & D rate reaches 10%, far exceeding that of the same industry; In terms of manufacturing end and mold, the company has 2 μ M-level precision processing capacity. In terms of equipment, the company realizes full-automatic assembly and production through self-developed equipment; Client: the company’s mobile phone customers are Android, covering Huawei, Xiaomi, vivo, ZTE, Wentai, Huaqin, Longqi and other customers, accounting for 60% of the revenue. The company’s automotive customers include great wall, Geely, Chang’an, Byd Company Limited(002594) , JAC and so on.
On board business: intellectualization + localization, driving the rapid growth of on-board high-speed connectors. Thanks to the rapid penetration of auxiliary driving system and the rapid growth of on-board high-speed connectors, the market scale of on-board high-speed connectors in China is expected to reach 12 billion yuan in 2025 and 45% CAGR in five years. In 2021, China’s vehicle mounted high-speed connectors were dominated by foreign-funded enterprises, and the localization rate was only 10%. Since 2014, the company has laid out vehicle mounted connectors with obvious first mover advantages. It is expected that with the introduction of more end customers, the company’s high-speed connectors will achieve rapid growth, and the revenue is expected to reach 300, 600 and 1 billion yuan from 2021 to 2023.
Mobile phone business: RF connectors are growing steadily, and BTB (board to board) connectors and LCP (liquid crystal polymers) antennas can be expected in the future.
RF connector is the main profit source of the company, benefiting from the improvement of 5g penetration and steady growth in 2022. In 2021, the gross profit of H1 company’s RF connector and cable connector business accounted for 45%. 5g promotes the growth of RF coaxial connector demand. In 2021, the global 5g mobile phone shipment volume was 600 million and the penetration rate was 40%. It is expected that with the rapid growth of 5g mobile phone shipment, the RF connector revenue will increase by 20% and 10% in 2021 and 2022.
BTB connector benefits from domestic replacement, and LCP antenna waits for millimeter wave mobile phone to start. 1) The single unit value of BTB connector reaches 8 yuan, the market scale exceeds 10 billion yuan, the industry technical threshold is high, and it is mainly dominated by foreign-funded enterprises. The company’s RF BTB and ordinary BTB connectors have been successfully mass produced, which is expected to benefit from the improvement of localization rate in the future. It is expected that the revenue growth rate of other connectors of the company will be 20% from 2021 to 2023. 2) LCP antenna is mainly used in millimeter wave mobile phones and single machines with a value of more than 80 yuan. The company joins hands with flex to invest in Henghe Dingfu through capital increase, and layout soft boards and LCP products. In the future, with the rise of millimeter wave mobile phones, the company is expected to benefit.
Profit forecast and Valuation: it is estimated that the company’s performance from 2021 to 2023 will be RMB 380, 500 and 650 million, with a simultaneous increase of 42%, 32% and 29%, EPS of RMB 0.91, 120 and 1.55, and PE of 45, 34 and 27 times. PE valuation is adopted. Considering the doubling growth of the company’s vehicle connector and the steady growth of mobile phone connector, the company is given a PE valuation of 40 times in 22 years, with a purchase rating corresponding to the target price of 48 yuan / share.
Risks: smartphone shipments decline, 5g progress is less than expected, automobile business is lower than expected, etc.
