\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 10 Skyworth Digital Co.Ltd(000810) )
Event: Skyworth Digital Co.Ltd(000810) released the annual report of 2021. In 2021, the company realized revenue of 10.85 billion yuan, yoy + 27.5%; Achieved performance of 420 million yuan, yoy + 9.9%. After conversion, the revenue of 2021q4 in a single quarter was 3.22 billion yuan, yoy + 25.4%; Achieved a performance of 150 million yuan, yoy + 48.9%. The company has a solid position in the set-top box market. When the global epidemic is effectively controlled, the set-top box business is expected to continue to recover. With the rapid development of global IP, broadband, intelligent vehicle display and Internet of things, the company’s emerging businesses such as network connection equipment, virtual reality VR and vehicle display are expected to grow rapidly.
Strong recovery of set-top box business: with the gradual control of the epidemic in China, the demand for set-top boxes continues to recover. The revenue of smart terminals (mainly set-top boxes) of 2021h2 company was yoy + 31.4%, an increase of 16.8% compared with 2019h2. In the long run, the overseas digital set-top box industry is in the development stage of digitization, high definition and integration. China’s set-top box industry is vigorously developing 4K and evolving to 8K super. The global demand for the upgrading of set-top boxes is improving. Facing the pressure of chip shortage, the company has a strong supply chain system and global manufacturing capacity, and its pressure resistance will be better than that of its peers.
Rapid growth of broadband equipment business: 2021h2, the company’s broadband equipment business revenue yoy + 130.4%. The “dual Gigabit” policy puts forward higher requirements for the configuration of home intelligent gateway and networking, and promotes the comprehensive upgrading of China’s network communication connection equipment. In 2021, the company gained considerable market share in the centralized purchase project of home gateway of the three major operators, and the market share of PON gateway was the first camp. EPON, GPON and home intelligent gateway of the company have successively won the bid for Fujian radio and television, Beijing Gehua Catv Network Co.Ltd(600037) and other projects, leading the market share in China’s Radio and television market. Under the tide of global IP, optical fiber and digital economy, the company has broad prospects for the development of broadband network connection equipment business in China and overseas.
The pressure of rising prices of raw materials is still on, and the gross profit margin of Q4 fell year-on-year: the gross profit margin of Q4 fell by 1.1pct year-on-year in a single quarter. Compared with the same period last year, the price of flash set-top box and DDR storage parts is still in an important position. In 2021q4, the spot price of DRAM increased by more than 60% year-on-year. The rise in the price of raw materials led to a year-on-year decrease of 4.7pct in the gross profit margin of 2021h2’s intelligent terminal business. However, DDR prices have shown a downward trend since 2021q3. We expect that the cost pressure of the company will be gradually relieved in the future.
Q4 profitability increased year-on-year: the company’s Q4 single quarter net interest rate increased by 0.7pct year-on-year. We believe that the main reasons are as follows: 1) the company strengthened cost control, and the Q4 management and R & D cost rates were -1.8 / – 0.5pct year-on-year respectively; 2) The company’s forward foreign exchange fair value increased, and the net income from changes in Q4 fair value increased by 30 million yuan year-on-year; 3) The government subsidy of Q4 company increased by 10 million yuan year-on-year.
Q4 net cash flow from operating activities decreased year-on-year: the company’s Q4 net cash flow from operating activities decreased by 590 million yuan year-on-year. We believe that the main reason is that based on the judgment of the supply of raw materials such as storage chips and WiFi chips, the company has strengthened the preparation of goods, and the cash paid by Q4 company for purchasing goods and receiving labor services has increased by 1.04 billion yuan year-on-year. The inventory scale of Q4 company reached 2.16 billion yuan, an increase of 920 million yuan year-on-year.
Investment suggestion: the company is a leading enterprise of set-top box in China. It vigorously develops broadband network connection equipment and takes the lead in technology. In the medium and long term, the company’s position in the set-top box market is stable, and the broadband network communication connection equipment will usher in development opportunities. When the macro environment is improved, it is expected to usher in a boom upward cycle. We expect the company’s EPS from 2022 to 2024 to be RMB 0.64/0.77/0.92 respectively, maintaining the investment rating of buy-a.
Risk tip: the price of raw materials has risen sharply, and the progress of policy implementation is slower than expected
