\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: the company released the annual performance express in 2021. In 2021, the operating revenue was RMB 5.656 billion, a year-on-year increase of 43.2%, the net profit attributable to the parent was RMB 1.493 billion, a year-on-year increase of 146.6%, and the net profit attributable to the parent after deduction was RMB 1.384 billion, a year-on-year increase of 169.72%. According to this calculation, 2021q4 achieved an operating revenue of 1.408 billion yuan, a year-on-year increase of 60.3%, a month on month decrease of 1.6%, a net profit attributable to the parent company of 538 million yuan, a year-on-year increase of 117.6%, a month on month increase of 22%, and a net profit attributable to the parent company of 463 million yuan after deduction, a year-on-year increase of 127% and a month on month increase of 8.1%.
There is a strong demand for new electronic components. During the “14th five year plan” period, the company’s downstream key weapons and equipment in the fields of aviation, aerospace, electronics, weapons, shipbuilding and nuclear industry gradually increased, the process of national defense information construction accelerated, the downstream demand was strong, the domestic substitution space was expanded, and the growth certainty of high-end electronic component enterprises was strong. As an upstream enterprise of military supplies, the company will accelerate the growth of beneficiary orders, and the sales of high value-added products such as new electronic components business will increase year-on-year. Focusing on “building an ecological chain of electronic components industry”, the company strives to promote high-quality development and continuously improve its business performance.
The income and profit increased significantly, and the social burden was basically cleared away. In 2021, the operating revenue was 5.656 billion yuan, a year-on-year increase of 43.2%, and the net profit attributable to the parent company was 1.493 billion yuan, a year-on-year increase of 146.6%; The net profit attributable to the parent company after deduction was 1.384 billion yuan, a year-on-year increase of 169.72%. In the first half of 2021, the company made a one-time provision for the out of plan expenses of retirees of RMB 233 million. If this expense is not included, the actual net profit attributable to the parent company in 2021 will reach RMB 1.726 billion, a year-on-year increase of 185%, significantly exceeding the market expectation.
Equity incentive landing, there are still two follow-up periods worth looking forward to. In the second half of 2021, the first exercise condition of the company has been achieved and successfully exercised. There are 351 eligible incentive objects this time, and the number of exercisable stock options is 3.328 million, accounting for 0.65% of the current total share capital of the company, and the exercise price is 11.67 yuan / share. The company has a wide range of exercise rights this time, and the core employees are fully motivated. The number of exercises this time accounts for 40% of the number of granted interests, and there are still two expectations to be unlocked in the future. The number of exercises in phase II and phase III accounts for 30% of the number of authorized interests respectively. October 2022 will enter the second exercise period. The smooth implementation of equity incentive will help to fully mobilize the enthusiasm of management and key employees and benefit the medium and long-term development of the company.
Government subsidies help R & D investment, and the competitiveness of high value-added products is remarkable. Focusing on the core business of electronic components, the company further increased R & D investment, and the R & D expense rate of the company continued to rise. As the national team of new electronic components, the company can get full support. The beginning balance of government subsidies in 2021 was 176 million, with an increase of 43.27 million yuan in the first three quarters, helping to improve R & D capacity. In January 2021, Zhen 6003.6 invested 37.64 million yuan in the technical transformation of the integrated circuit production line in the existing plant to develop integrated circuit products with better performance and more reasonable structure. Efficient R & D investment will promote the company to break through key technologies, boost the competitiveness of high value-added products, and promote the continuous expansion of the company’s business. Business orders are expected to grow rapidly and business benefits are expected to continue to improve.
Actively expand production and promote sustainable development. Deterministic order growth promotes the company to actively expand production. In October 2021, the company invested 160 million yuan to transform the existing plant, purchase equipment, tooling fixtures and molds, and build the production line of chip tantalum electrolytic capacitor and conductive polymer chip aluminum electrolytic capacitor (laminated aluminum), forming an annual production capacity of 600 million chip capacitors. In February 2022, the company deliberated and approved the proposal on the implementation of the construction project of electronic ceramic material plant. It plans to build an electronic ceramic material plant with a total construction area of 12091 square meters, which can meet the needs of the construction project of ultra micro MLCC dielectric material production line, and provide guarantee for the expansion of the company’s electronic ceramic material production capacity, product structure optimization and industrial upgrading. The company actively expands its production based on long-term considerations, which is a positive response to the market and reflects the company’s confidence in product competitiveness. IGBT series chips began to be supplied, and there are broad prospects for domestic substitution of military products. The company’s IGBT series chips have begun to be supplied to the market in small quantities, and their electrical parameters can be compared with the chips of the same specification of Infineon, the leader in the Chinese market, with excellent performance. Under the background of military products localization and substitution, the company’s IGBT series chips are expected to obtain large orders in the future, with broad prospects.
Zhenhua Department has strong strength and bright future in the field of high-end manufacturing. Zhenhua Xinyun (mainly engaged in tantalum capacitor), Zhenhua Yunke (resistor), Zhenhua Fu (chip inductor), Zhenhua Yongguang (semiconductor discrete device) and Zhenhua Jilin Sino-Microelectronics Co.Ltd(600360) (integrated circuit) are the main contributors to the company’s revenue and profit. They have strong competitive advantages in their respective fields and good market recognition. The subsidiary Zhenhua new energy also timely adjusted loss making projects, gradually realized product transformation and upgrading, and gradually made profits. In the future, as the company deepens reform, increases R & D investment, enhances industrial coordination, and subsidiaries make efforts in their respective fields, the company’s profitability will further grow.
Based on the special field, the company’s electronic components continue to expand to the high-end civil field; At present, civil fields such as rail transit, medical devices and new energy vehicles will be considered to be expanded in the future. Future development will be guided by market-oriented structural reform and systematic reform, improve the electronic components industry chain, deepen innovation drive, comprehensively improve the level of scientific and technological innovation, human resources, capital operation and business control, and further improve the quality of listed companies.
Profit forecast and rating. In the future, focusing on the core business of electronic components, the company will further increase R & D investment and strive to break through key technologies. With the continuous emergence of new products, the company’s core competitiveness and profitability will continue to improve. We expect the net profit attributable to the parent company from 2021 to 2023 to be 5.656 billion yuan, 7.356 billion yuan and 9.258 billion yuan, EPS to be 288 yuan, 4.27 yuan and 5.44 yuan, corresponding to 38 times, 26 times and 20 times of PE, maintaining the “buy” rating.
Risk warning: the procurement of weapons and equipment is not as expected; The mass production of new products was less than expected.
