\u3000\u3 Shengda Resources Co.Ltd(000603) 236 Quectel Wireless Solutions Co.Ltd(603236) )
Event: on April 15, 2022, the company released its annual report for 2021. In 2021, the company achieved a total revenue of RMB 11.262 billion, a year-on-year increase of 84.45%, a net profit attributable to the parent company of RMB 358 million, a year-on-year increase of 89.43%, and a deduction of non attributable net profit of RMB 335 million, a year-on-year increase of 97.18%.
Comments:
The performance is in line with expectations, and the business income continues to improve
According to the company’s announcement, the company achieved a revenue of 3.786 billion yuan in Q4 in 2021, a year-on-year increase of 99.49%, and a net profit attributable to the parent company of 121 million yuan, a year-on-year increase of 89.25%; From 2015 to 2021, the compound growth rate of the company’s revenue reached 63%, and the compound growth rate of net profit attributable to the parent company reached 83%. Throughout the year, the company mainly performed well in three aspects: R & D investment, product layout and supply chain management:
1) continuous R & D: the company attaches great importance to technological innovation and maintains high R & D investment. In 2021, the R & D investment reached 1.022 billion yuan, accounting for 9.08% of the operating revenue, with a year-on-year increase of 44.62%; In addition, the company set up a R & D center in Guilin in 2021 to further improve the overall technology R & D, product innovation and patent invention innovation ability, and provide localization support for customers and projects in South China. As of the annual report of 2021, the company had 6 R & D centers in Shanghai, Hefei, Foshan, Guilin, Belgrade and Vancouver, and the rapid development of globalization of the company has been reliably supported.
2) deepening and broadening of product layout: the company firmly built a “module supermarket”, continuously expanded the module product portfolio, launched a variety of new module products and solutions, and achieved great gains in 5g and vehicle mounted fields. Five 5g modules won the bid of China Mobile with the largest share, accounting for nearly 50%; In addition, the company accelerated the expansion of industrial lines and laid out supporting products other than wireless modules, such as antenna, queicloud Internet of things cloud platform, ODM business and smart city digital integration business, so as to further strengthen the overall development strength of the company.
3) deepen supply chain management: under the background of shortage of raw materials and rising upstream costs in 2021, on the one hand, the company continuously optimizes supply chain management, predicts sales and actively prepares goods to ensure supply; On the other hand, the company has set up self built factories in Changzhou and Hefei to ensure the stable supply of production capacity and meet the needs of customers through the mode of “self construction + global OEM”.
In terms of revenue structure, the proportion of overseas business increased, and the proportion of Chinese business in revenue decreased slightly. The company continued to develop its business at home and abroad and continuously improved its market share. In 2021, its overseas revenue was 4.97 billion yuan, a year-on-year increase of 113.27%, accounting for 56% of its revenue, which was higher than that of last year. It was mainly due to the steady progress of the company’s internationalization strategy. With the accumulation of new product development in recent years, perfect supply chain system and quality and quantity delivery capacity, its overseas business grew rapidly. In addition, as the overall selling price in the overseas market is higher than that in China, its gross profit margin is relatively high in China, and the increase in the proportion of the company’s overseas business contributes to the gross profit margin to a certain extent.
The gross profit rate decreased slightly and is expected to recover after the upstream shortage is alleviated
From the perspective of profitability, under the influence of factors such as the price rise of upstream raw materials and repeated epidemic, the overall performance of the company’s gross profit margin and net profit margin is relatively stable, the gross profit rate has declined slightly, and the net profit margin has been improved. At present, the company’s gross profit margin is generally stable at about 20%, 17.56% in 2021, down 2.67 percentage points from last year; The net profit margin of the company remained stable at about 3% as a whole, up from 3.18% in 2021, an increase of 0.08 percentage points over last year. On the whole, the company’s interest rate is stable and slightly changed. The gross profit margin decreased slightly in 2021, mainly due to the shortage of upstream raw materials, and the rising cost can be transmitted to downstream customers after a long time. It is expected that in the future, with the easing of material shortage, the epidemic situation will be further controlled, and the company’s profitability is expected to recover gradually.
The fine management ability was further improved, and the overall cost control was good
From the cost side, the company’s fine management ability was further improved, the overall cost control was good, and the cost rate decreased further during the period. In 2021, the company’s expense rate decreased from 17% to 15%, of which the sales expense rate was 3.20% and the management expense rate was 2.36%. Due to the small amount of financial expenses, the overall impact on the company was weak. On the one hand, the decrease of expense rate is due to the rapid growth of the company’s revenue. On the other hand, it also reflects the improvement of the company’s expense control ability, the improvement of operation and management efficiency and the decline of the proportion of overall expenses. With the further expansion of the volume, the company can maintain good expense expenditure and management ability, which is conducive to sustainable development and further improve its profitability in the future.
Maintain R & D investment and continuously enhance the ability of technological innovation
The company attaches great importance to technological innovation, maintains high R & D investment, and lays a good foundation for subsequent development. In 2021, the R & D investment of the company was 1.022 billion yuan, with a year-on-year increase of 44.62%, and the R & D expense rate was 9.07%. With the support of R & D, the company has produced new products frequently. In terms of 5g modules, the company took the lead in launching the second generation 5gnr communication module supporting 3GPP R16 protocol. In terms of vehicle modules, the company has released more than 6 new products, and the company’s overall products and related services have been continuously developed and optimized.
The company’s R & D system continues to grow and improve, and the number of R & D personnel continues to rise. As of December 31, 2021, the total number of employees of the company is 4107, including 2997 R & D personnel, accounting for 73% of the total, including 10 doctoral students, 299 masters and 2034 undergraduates. All R & D personnel have bachelor’s degree or above, accounting for the most. The continuous growth of the company’s R & D team provides effective guarantee for subsequent new product development, new business development and related after-sales support activities.
In the medium and short term, the company has strong growth certainty — two advantages to consolidate the company’s moat
1) module supermarket & channel advantages: the company arranges all major industrial lines of IOT module, covering the whole scene + full system, widely arranges channels at home and abroad, deeply grasps the industry knowhow, and creates a “module supermarket”, which is expected to take the lead in enjoying the dividends of the application of downstream subdivided industries. As a module leader, the company adheres to the strategy of broadening and expanding, creates the most complete product series of multiple categories and systems, and has been involved in a wide range of downstream application fields, covering Internet of vehicles, mobile payment, smart home, smart city, wireless gateway, smart meter, smart industry, Jiangsu Nonghua Intelligent Agriculture Technology Co.Ltd(000816) and other fields, covering cellular 2 / 3 / 4 / 5G, lpwa and other systems, and layout the corresponding sales system and response mechanism, “Module supermarket” is worthy of its name. In addition, the company has a wide range of channels at home and abroad, has a deep understanding of the industry knowhow, and can respond to customer needs in a timely manner. At present, the development momentum of the Internet of things industry is good, and there are many downstream vertical application segments with fragmentation characteristics. Once the outbreak point appears, the company is expected to take the lead in grasping customer needs, make use of existing products and industry knowhow, and quickly seize growth opportunities
2) on board first mover & R & D advantage: the company has good R & D ability and first mover advantage, has a high market share in on-board business, and has broad development space for intelligent networked vehicles in the future. The growth of relevant businesses of the company is determined.
At present, the company’s vehicle business occupies the first place in the market, there are many cooperative vehicle enterprises, the products are rich and of high quality, and the stability and connection ability are guaranteed to meet the needs of all kinds of customers. At present, the global intelligent Internet connected vehicle market will usher in a period of rapid development, and the overall penetration of China’s Internet of vehicles market has huge room to improve. The superimposed vehicle module business is the first to benefit in the development process, and the growth curve of the company is clear.
In the long run, the company has broad development space in the future – two capabilities to ensure the future growth of the company
1) fine management ability: the pre effect of the company’s R & D expenses is initially reflected, and the fine management ability is gradually improved, which is expected to improve the profitability in the future. The company’s R & D expenses are in front. With the promotion of the company’s new products, the long-term cost rate has room to decline; While expanding its scale, the company is gradually improving its overall fine management ability, more refined control over costs and expenses, has a strong scale effect in the long term, and its long-term profitability is expected to be gradually enhanced.
2) whole ecosystem strategic development capability: whole ecosystem strategic deployment capability = comprehensive soft power + the ability to conquer new businesses. The comprehensive “soft power” mainly includes industry knowhow, understanding of suppliers and customers, etc; The ability to conquer new businesses is to gradually transition from hardware equipment to solution design and platform services. The price competition in the module industry is fierce. It is difficult to significantly improve the profitability simply by selling module hardware. In the era of everything Zhilian, taking modules as the entrance, through the provision of cloud platform / overall industry customized solutions, realize service upgrading and transformation, and build the ability of whole ecological strategic layout, which helps to improve the overall value of the enterprise, Consolidate core competitiveness. The company actively expands new businesses. New businesses represented by antenna business, ODM business and SIM card business have been mature and operated. In the future, with the further improvement of the whole ecological deployment line of the company, there is a broad growth space.
Profit forecast and investment rating
The Internet of things is a long-term golden race track. As a leading enterprise of the Internet of things module, the company has a deep layout of the whole track. It also has significant competitive advantages in high threshold tracks such as car and 5g, and has a large space for development in the future. It is estimated that the total revenue of the company from 2022 to 2024 will be 17.019 billion yuan, 24.520 billion yuan and 32.507 billion yuan respectively, corresponding to 1.0 times, 0.8 times and 1.2 times of PS respectively, and the estimated net profit will be 642 million yuan, 1.001 billion yuan and 1.36 billion yuan respectively, maintaining the “buy” rating.
Risk factors
The development of the Internet of things industry was not as expected, the intensified competition in the Internet of things industry triggered a price war, and the covid-19 epidemic spread repeatedly
