\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 885 Hongfa Technology Co.Ltd(600885) )
The company is a global leader in the relay industry, and many downstream companies contribute to the performance increment. Founded in 1984, the company has been deeply engaged in relay for nearly 40 years. Since its inception, it has been high-end and export-oriented. It is the only domestic funded manufacturer in the first tier of relays in the world, with strong comprehensive strength. In 2018, the company achieved the first market share of relays in the world and has remained so far. At present, the company has six main products: communication relay, power relay, power relay, automobile relay, sealing relay and industrial relay. It leads in the main downstream market share, and has developed new products represented by low-voltage appliances on the basis of relays, opening the space for performance increment. In recent years, the company’s revenue and profit have increased steadily, the business structure is still dominated by relays, and electrical products such as low-voltage appliances have gradually contributed to the increment. In the first half of 2021, the company’s relay revenue reached 4.347 billion yuan, accounting for 92.3%; The revenue of electrical products reached 388 million yuan, accounting for 7.7%. Among them, the low-voltage electrical appliance business was positioned as the second main business of the company in 2014, and the revenue proportion increased year by year, which is expected to become the next important growth point of the company’s performance.
The automobile and new energy vehicle business has entered a rapid growth channel. 1) Automotive Relay: after the acquisition of Haila in 19 years, the company has continuously improved its global competitiveness through channel integration and product introduction, and 3q21 revenue increased by 47% year-on-year. 2) High voltage DC relay: high voltage DC is in the same starting line with overseas competitors, and ranks second in the world with high market share of cost-effective products. 3q21 revenue increased by 155% year-on-year. The product supply has gradually expanded from two main relays to two main relays + two auxiliary relays, and the value of single vehicle products has been increasing. With the continuous breakthrough of existing high-quality customers + new customers, the company’s business is expected to enter a high-speed growth channel in the future.
Traditional areas maintained a good growth trend. 1) General relay: the main downstream are large and small household appliances and new energy, which are expected to maintain stable growth. 2) Power relay: in 2022, China entered a new round of smart meter replacement cycle, superimposed with the transformation needs of other smart terminals. 3) Signal relay: Internet of things, 5g and other scenarios bring new increment. 4) Industrial relay: the demand of intelligent manufacturing for industrial relay has increased, and domestic substitution has accelerated.
Low voltage electrical appliances have large growth space. The low-voltage electrical appliance market is nearly 100 billion, and domestic substitution is accelerating. In recent years, the company has strengthened its layout in the field of low-voltage electrical appliances, continuously enriched its product categories, and has achieved sales in North America, Europe, China and other major markets. The market share of the company is relatively low, and there is still enough room for improvement. With the company accelerating its efforts in the field of low-voltage appliances, the company’s low-voltage appliance business is expected to maintain a rapid growth rate in the future and contribute new increment to the company’s performance.
Investment suggestion: the growth rate of the company’s traditional fields is steady, and the high-voltage DC relay business for new energy vehicles maintains rapid growth. We expect the company’s revenue from 2021 to 2023 to be 10.02 billion yuan, 12.44 billion yuan and 15.65 billion yuan respectively, with growth rates of 28.2%, 24.1% and 25.9% respectively; The net profit attributable to the parent company was 1.06 billion yuan, 1.39 billion yuan and 1.82 billion yuan respectively, with growth rates of 27.1%, 31.3% and 30.8% respectively; EPS is 1.42/1.86/2.44 yuan respectively. The closing price on March 30, 2022 corresponds to 26xpe in 22 years. The average PE value of comparable companies in 22 years is 35x. The company’s valuation in 22 years is lower than the average value of comparable companies, which is at the low historical valuation of the company and maintains the “recommended” rating.
Risk warning: the risk that the sales volume of new energy vehicles is lower than expected; The risk that the development of new customers is not as expected; The risk that the price of raw materials rises sharply and affects the profitability of the company; The risk that the production capacity of the raised investment project does not meet the expectation.
