\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: the company released the performance forecast of 2022q1. In 2022q1, the company realized the net profit attributable to the parent company (RMB 548 ~ 630 million, year-on-year + 122.16% ~ 155.40%, month on month + 1.86% ~ 17.10%), deducting the net profit not attributable to the parent company (RMB 535 ~ 615 million, year-on-year + 127.26% ~ 161.25%, month on month + 15.55% ~ 32.83%).
The company’s performance in 2022q1 increased significantly year-on-year and maintained growth month on month. On the one hand, this is the embodiment of the improvement of governance structure brought by the growth of downstream demand for military electronics, the increase of sales of high value-added products and the implementation of equity incentive on the performance side; On the other hand, as the headquarters of China’s military electronics industry, the company’s performance has further verified the high outlook of the military industry.
1) military passive components business: benefited from the large-scale loading of downstream weapons and equipment, the improvement of localization rate and the improvement of national defense informatization rate, and achieved sustained growth. For example, zhenhuafu, which is mainly engaged in inductors and filters, had a revenue CAGR of 27.91% and a net profit CAGR of 57.47% from 2018 to 2020, a revenue of + 18.68% and a net profit of + 84.60% year-on-year in 2021h1; Zhenhua Yunke, which is mainly engaged in resistance and capacitance, had a revenue CAGR of 16.59% and a net profit CAGR of 56.18% from 2018 to 2020, a revenue of + 39.06% and a net profit of + 63.83% in 2021h1. In addition, Zhenhua Xinyun invested 160 million yuan to transform the plant to form an annual production capacity of 600 million chip capacitors. The construction period is 36 months. After completion, it can realize an annual new revenue of 230 million yuan and a net profit of 17 million yuan. The project will help the company strengthen the construction of civil high-end product production line and form a new performance growth pole.
2) more than passive components, the company’s layout in the semiconductor field is the main reason for its higher growth rate than that of the same industry. Zhenhua micro and Zhenhua Yongguang, subsidiaries of military integrated circuits, achieved rapid growth. Among them, Zhenhua micro is mainly engaged in hybrid integrated circuits, with a revenue of 329 million yuan in 2021h1, a year-on-year increase of + 93.54%, and a net profit of 115 million yuan, a year-on-year increase of + 140.81%; Zhenhua Yongguang is mainly engaged in semiconductor discrete devices, with a revenue of 498 million yuan in 2021h1, a year-on-year increase of + 35.65%, and a net profit of 168 million yuan, a year-on-year increase of + 115.40%.
3) high R & D investment brings strong expansion ability to the company China Zhenhua (Group) Science & Technology Co.Ltd(000733) R & D investment keeps a significant lead in the same industry. For the first year of 20202020 / 2022020 for the first year of 2020202020202020 for the first year of the year of 2020202020202020: the spending on research and development such as ‘s China Zhenhua (Group) Science & Technology Co.Ltd(000733) withthe expansion of categories, the core competitiveness of enterprises has been continuously enhanced. We think this is the embodiment of the company’s strong expansion ability in performance.
4) continuous improvement of profitability. In 2021, the company achieved a net interest rate of 26.40%, a year-on-year increase of + 11.15pct; Weighted average roe22 33%, yoy + 11.64pct. The improvement of profitability mainly comes from the following two aspects: first, the scale effect brought by the growth of sales of military electronic components; Second, the types of products have been continuously expanded, and the proportion of sales of high value-added products has increased.
Investment suggestion: we expect the net profit attributable to the parent company from 2021 to 2023 to be RMB 1493, 2189 and 2866 million, corresponding to the current valuation levels of 37x, 25X and 19x. As the headquarters of military electronics and semiconductors under CEC, it has significant valuation advantages and maintains the “buy” rating.
Risk warning: CEC’s change in the company’s positioning; The development of military electronics and other businesses was less than expected.
