\u3000\u3 Guocheng Mining Co.Ltd(000688) 668 Dongguan Dingtong Precision Metal Co.Ltd(688668) )
Company announcement
On April 9, the company issued a fixed increase plan, which plans to issue no more than 25.542 million shares to no more than 35 specific objects, raising a total of no more than 800 million yuan, which is intended to be used for projects such as high-speed communication connector components and new energy vehicle connectors.
Comments
The fixed growth plan is released, and the capacity improvement is imminent. The capital raised in the fixed increase plan is not more than 800 million yuan, of which 388 million yuan is proposed to be invested in the production and construction project of high-speed communication connector components, 252 million yuan is proposed to be invested in the production and construction project of new energy vehicle connectors, and the remaining 160 million yuan is used to supplement working capital. (1) The construction period of the high-speed communication connector assembly project is 30 months. After completion, it is expected to increase the annual production capacity by 47.7 million, increase the annual operating revenue by 621 million yuan, increase the annual net profit by 101 million yuan, the after tax investment IRR is 18.86%, and the static investment payback period is 7.65 years. (2) The construction period of the new energy vehicle connector project is 30 months. After completion, it is expected to increase the annual production capacity by 24.9 million, increase the annual operating income by 366 million yuan, increase the annual net profit by 51 million yuan, the after tax investment IRR is 15.72%, and the static investment payback period is 8.28 years.
Communication vehicles have dual drives, with significant performance growth. In 2021, the company achieved an operating revenue of 568 million yuan, an increase of 58.76% year-on-year; The net profit attributable to the parent company was 109 million yuan, an increase of 50.39% year-on-year. Q1-Q4 quarterly revenue increased by 104.42%, 36.84%, 45.43% and 77.23% respectively year-on-year; The gross profit margin and net profit margin were 34.77% and 19.26% respectively. Even if the price of upstream raw materials rises, the company still achieves good performance driven by the high-speed business of communication and automobile. At present, in the composition of main business income, the revenue of communication connector components contributes 415 million yuan, accounting for 72.99%, with a year-on-year increase of 61.20% and a gross profit margin of 36.76%; The revenue of automobile connector components contributed 76 million yuan, accounting for 13.37%, with a year-on-year increase of 67.10% and a gross profit margin of 32.82%.
5g base station construction and data center equipment upgrading drive the demand for communication connectors. With the orderly construction of 5g base stations and supporting facilities and the upgrading of data center equipment, the demand for communication connectors, especially high-speed connectors, will continue to grow. According to the prediction of bishop & Associates, the global communication connector market will reach US $21.5 billion in 2025, and the Chinese market is expected to reach US $9.5 billion, accounting for 44.2% of the global market share. The company has been deeply engaged in high-speed communication connectors for many years. Taking I / O connectors and components as the main expansion direction, the company supplies MOLEX, Amphenol, Avic Jonhon Optronic Technology Co.Ltd(002179) and other well-known manufacturers at home and abroad, deeply explores the vertical demand of customers, enriches product types and improves the supply share of customers. At present, the cage specification of the company’s communication connector shell has been increased from 1×1 to 2×6, and radiator components have been gradually added to improve ASP; The product series are constantly enriched, and a product matrix including qsfp-dd, SFP +, qsfp + and other categories has been formed. In the future, thanks to the demand of 5g construction for communication connectors and the increase of the company’s supply share in core customers, the communication business will still maintain a high and stable growth rate.
Layout and rapid development of new energy vehicle market, from tier2 to Tier1. Thanks to the dividend of the rapid development of new energy vehicles, the new market of Shanxi Guoxin Energy Corporation Limited(600617) automobile connectors will be about 6.9 billion yuan in 2021. Under optimistic calculation, it is expected to reach 14 billion yuan in 2022, with a year-on-year increase of 102.9%, 35 billion yuan in 2025 and 50.1% CAGR in four years; In addition to the demand for traditional fuel vehicles, the total market of automobile connectors in China is expected to be 50 billion yuan in 2025. The company actively develops new customers, arranges the new energy field, and moves from a secondary supplier to a primary supplier. In 2021, the company has established cooperation with Byd Company Limited(002594) , Phoenix Contact, Zhejiang Narada Power Source Co.Ltd(300068) , honeycomb energy, etc., and is still expanding other Chinese independent brand car enterprises. In addition, the company has vigorously developed new product types and added new energy products such as harness connector, high-voltage connector, electric control connector and electric water pump. In 2021, the company’s automobile connector and its components achieved an operating revenue of 759368 million yuan, an increase of 67.10% year-on-year. With the increase of key customers in the future, the company will benefit from the strong demand of the new energy market. The new energy business is expected to provide higher growth rate and stronger driving force, becoming the second growth curve of the company in the “double carbon” era.
Investment advice
As a high-quality connector manufacturing enterprise in China, the company’s communication and automobile businesses benefit from the promotion of 5g construction and the release of demand for new energy vehicles, which are expected to maintain a high growth rate. After the fixed increase is implemented, the production capacity will be further expanded, and the growth can be expected in the future. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be 180 million yuan, 264 million yuan and 356 million yuan respectively, corresponding to 21 times, 15 times and 11 times of the current PE respectively, maintaining the buy rating.
Risk tips
The development of new energy vehicles is less than expected; Upstream raw material cost fluctuation; The production expansion progress is less than expected.
