\u3000\u3 China Vanke Co.Ltd(000002) 475 Luxshare Precision Industry Co.Ltd(002475) )
We lowered the target price of Luxshare Precision Industry Co.Ltd(002475) ( Luxshare Precision Industry Co.Ltd(002475) . CH) to 43.7 yuan, with a potential increase of 29.8%, and reiterated the “buy” rating.
Luxshare Precision Industry Co.Ltd(002475) long-term and short-term business expansion strategies are clear and implemented in place; The fundamental expectation and valuation of the electronics industry have limited downward space, and the “buy” rating is reiterated. Year to date, the company’s share price has fallen by more than 30%. It is not only affected by the weak demand for smartphones in the first quarter and the pressure on shipments year-on-year and month on month, but also affected by the mood of violent fluctuations in the general environment of the secondary market. We believe that the market’s expectation of smartphone shipments this year has been at a low level, and the fundamental expectation is that there is little risk of continued downward. We maintain the prediction of 4% year-on-year growth in mobile phone shipments this year in 2022 technology outlook and the morphological judgment of quarterly shipments first down and then up year-on-year. We expect mobile phone shipments to improve month on month from the second quarter. As the leader of Apple’s supply chain, it is not easy for Tencent to achieve a year-on-year increase of 25% – 30% in net profit in the weak first quarter. However, whether it is the steady expansion of Apple’s supply chain, non mobile phone and other manufacturing platforms in the medium and short term, or the long-term layout of automotive electronics and automotive ODM, it will contribute to the increasing performance of Tencent (refer to the first coverage of the company). We reiterate the “buy” rating, and the company is expected to enjoy the double benefits of fundamental improvement and valuation improvement from the second quarter.
The performance of 2021 and 1q22 increased steadily. The net profit of Lixun 4q21 decreased by 6% year-on-year, and the median net profit forecast of 1q22 increased by 28% year-on-year, both slightly lower than the consensus forecast of the market. We believe that the decline in profits in 2021 is mainly due to the decline in the shipment volume of airplads and the high investment in the process of integrating the armor business. The strong year-on-year growth guidance of 1q22 net profit fully reflects the ability of Lixun to achieve profit growth under the difficult external environment such as weak demand for mobile phones, repeated epidemics and shortage of supply chain. Therefore, although we adjusted the revenue and expense ratio of Tencent, we basically maintained the earnings per share forecast in 2022 and 2023.
Steady progress in long-term business expansion: 1) the company has established a joint venture with Chery new energy, which is expected to build new energy vehicles for automobile brands with the help of automobile manufacturing OEM mode, and develop towards the first-class supplier. 2) It is proposed to raise no more than 13.5 billion yuan for the expansion of intelligent wearable, intelligent terminal parts, high-voltage connection system of new energy vehicles, advanced semiconductor packaging, intelligent mobile terminal display module and intelligent vehicle connection system. We believe that Lixun has a clear strategic plan for the next five years, the executive power of the management is high, and the certainty of promoting the long-term growth of the company is high.
Investment risk: the demand recovery of smartphone industry is less than expected. Geopolitical risks exacerbate the “lack of core” in the supply chain. The gross profit margin declined due to the intensification of industry competition. Rapid expansion affects expense ratio and cash flow performance. The implementation of the long-term strategy has been repeated, and the resource investment is not concentrated enough.
