\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: the company recently released its 2021 annual performance express, which realized an annual operating revenue of 5.656 billion, yoy + 43.2%; The net profit attributable to the parent company was 1.493 billion, yoy + 146.6%, close to the upper limit of performance forecast (between 1.35 billion and 1.55 billion); Deduct non net profit of 1.384 billion, yoy + 169.7%. In a single quarter, the net profit attributable to the parent company in the four quarters of 2021 was 247 million, 269 million, 440 million and 538 million respectively, yoy + 122.9%, + 115.2%, + 258.1% and + 117.6%.
Comments: in 2021, focusing on the layout of “building an ecological chain of electronic components industry”, the company focused on promoting high-quality development. The customer demand for high reliable products downstream of enterprises in the new electronic components sector increased, the proportion of sales of high value-added products increased year-on-year, and the annual performance increased rapidly. At the same time, the company handled expenses in 2020 and 2021 respectively: 1) in 2020, the company liquidated the bankruptcy of its subsidiary Shenzhen communication, and fully accrued credit impairment losses on other receivables and net entrusted loans held by Shenzhen communication, with an amount of 109 million yuan; 2) In 2021, in order to speed up the stripping of the social functions of state-owned enterprises and solve the problems left over by history, the company made a one-time provision for the out of plan expenses and distributed them in the existing way, with an amount of 233 million yuan.
Focus on new electronic components to form a driving point for performance growth. After continuous structural adjustment, transformation and upgrading, the proportion of new electronic components continues to increase, accounting for 99.22% of revenue in 2020. The company’s net interest rates from 2019 to 2021q3 are 8.1%, 15.3% and 22.6% respectively, and the net interest rate continues to increase. 1) Zhenhua micro, a subsidiary, is mainly engaged in thick film hybrid integrated circuits. It has rapidly increased its volume in special fields. The net profit attributable to the parent company is RMB 115 million in 2021h1, and the net profit attributable to the parent company CAGR from 2018 to 2020 is 201.1%; 2) Sun Zhenhua Xinyun announced in October 2021 that it plans to invest 160 million yuan to carry out adaptive transformation of the existing plant and build a production line to form an annual production capacity of 600 million chip capacitors. The construction period of the project is 36 months, with an additional annual revenue of 230 million yuan and a net profit of 16.669 million yuan.
The effect of equity incentive is remarkable. The company carried out the first stock option incentive plan in 2019, with 368 people granted, 911.1 million stock options granted, the exercise price of 11.92 yuan / share, and the validity period is 5 years from the date of grant. The exercise period is from October 10, 2021 to October 9, 2022, and the exercise proportion is 40%, 30% and 30% respectively. The incentive effect is remarkable.
Investment suggestion: we believe that through structural adjustment, transformation and upgrading, the company has continuously enhanced the market application of high value-added products in key fields. At present, it has become a leading enterprise of special electronic components. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be 1.491 billion yuan, 2.005 billion yuan and 2.963 billion yuan respectively. The current share price corresponds to 37x / 28x / 19x PE from 2021 to 2023. Considering the strong demand of the company’s new electronic components business, we expect the company’s performance to continue to maintain rapid growth, cover for the first time and give a “recommended” rating.
Less than expected product development and delivery, risk: less than expected product development and delivery.
