\u3000\u3 China Vanke Co.Ltd(000002) 897 Wenzhou Yihua Connector Co.Ltd(002897) )
Key investment points
Stripping Hunan Yihua will significantly improve the overall performance of the company
The company announced that in order to focus on the main business and further optimize the allocation of resources, the company plans to transfer 95% of the equity of Hunan Yihua to Yihua holding for RMB 11.63 million. After the transfer, the company will no longer hold the equity of Hunan Yihua. This transaction needs to be deliberated and approved by the general meeting of shareholders of the company.
From January to September 2021, Hunan Yihua had an income of 80.86 million yuan and a loss of 35.2 million yuan. In the same period, the net profit attributable to the parent company of the listed company was 108 million yuan. In 2020, Hunan Yihua achieved an income of 65.41 million yuan and a loss of 54.97 million yuan. After stripping Hunan Yihua, the company’s performance will be improved. We reckon that we can achieve a year-on-year loss reduction of 30-40 million yuan in 2022.
The PV business locks in the steel price and exchange rate, and the profitability is guaranteed
The company’s photovoltaic support business is in a high-speed development channel. In May 2021, the company has completed the price negotiation with overseas photovoltaic support customers. The order price fluctuates according to the steel price on that day. After the customer’s order is issued, the company directly locks the steel price and exchange rate, which not only reflects the company’s competitive strength, but also ensures the profit margin of photovoltaic support business.
At present, the company is an important supplier of NT (the largest share of photovoltaic supports in the world). GCS and FTC are increasing rapidly, and has actively developed new customers such as Soltec and PVH. The expectation of overseas growth in the future is optimistic; The acquisition of Tianjin Shengwei fali China’s complete machine market has optimistic expectations for the development of the photovoltaic industry under the dual carbon trend in China, which is expected to open a new incremental market for the company. In January, the company announced that it planned to expand photovoltaic support business by no more than 1.077 billion to further support future scale expansion.
The high growth of automobile connector business is expected to improve the valuation
The electrification / intellectualization of vehicles opens up huge space for high-voltage and high-speed connectors. Suzhou Yuanye, a subsidiary of the company, has customized and developed ADAS, MDC, 5g T-box and other series connectors for Huawei. Customers include Huawei, APTIV, Byd Company Limited(002594) , Geely, etc. the revenue in 2021h1 increased by 110% year-on-year and is expected to enter a rapid growth channel.
Profit forecast and valuation
Expected high growth of photovoltaic support business; The connector business has significantly improved its profitability after stripping Hunan Yihua. Considering that this transaction still needs to be considered and approved by the general meeting of shareholders of the company, we will not raise the profit forecast temporarily and maintain the net profit attributable to the parent company of 183 million yuan, 314 million yuan and 423 million yuan in 202123; PE 36 times, 21 times, 16 times, “buy” rating.
Risk warning: the price rise of raw materials exceeds expectations; The impact of overseas trade policies on photovoltaic business exceeded expectations
