\u3000\u3 Shengda Resources Co.Ltd(000603) 236 Quectel Wireless Solutions Co.Ltd(603236) )
Event review:
The company issued a formal annual report. In 2021, it achieved a revenue of RMB 11.262 billion, a year-on-year growth of 84.45%, a net profit attributable to the parent of RMB 358 million, a year-on-year growth of 89.43%, and a net profit attributable to the parent of RMB 335 million after deduction, a year-on-year growth of 97.18%. In a single quarter, Q4 achieved a revenue of 3.786 billion yuan, with a year-on-year growth rate of 99.49% and a month on month growth rate of 19.78%. On the whole, the company's annual revenue maintained strong growth on the premise of high base, the pressure on raw materials at the cost side was still on, the expenses were properly controlled and the performance was brilliant.
Global demand for modules continues to be strong, and chip supply may continue to be tight until the second half of the year
The high boom of the module industry continues, and the high-speed modules are expected to continue to increase in volume. According to the latest data of countpoint, the shipment and revenue of global cellular Internet of things modules in 2021 increased by 59% and 57% respectively year-on-year. Among them, the revenue of Q4 global cellular Internet of things modules increased by 58% year-on-year, and India grew the fastest (+ 154%) according to the market; According to the system, 5g has the fastest growth (+ 324%), followed by CAT1 (+ 105%); By scenario, automobile, CPE, industry, PC and POS rank the top five. In terms of competition pattern, Q4's revenue share of Chinese module manufacturers accounts for more than 40%, of which Quectel Wireless Solutions Co.Ltd(603236) 266% ranks first. We believe that the demand for high-speed scenarios such as vehicle mounted and CPE will continue to grow, but the tight supply of global IOT chips is expected to continue into the second half of the year. The rise of upstream raw materials led to a decline in the company's comprehensive gross profit margin of 2.67% in 2021.
The company has outstanding highlights throughout the year, with high overseas growth, new business landing and excellent supply chain management
At the operational level, 1) overseas business grew rapidly. In 2021, the company's overseas revenue was 4.97 billion yuan, a year-on-year increase of 113.27%. The overseas market space is larger, the gross profit margin is higher, and the company's internationalization strategy is advancing steadily; 2) The new business has achieved initial results. In addition to continuous high-intensity new product research and development, the new businesses such as antenna, cloud platform and ODM laid out in the early stage of the company have taken root, helping the company enhance customer stickiness and explore the growth curve; 3) Excellent supply chain management, rolling 6-month strategic stock of upstream raw materials and guaranteed delivery of downstream self built production lines. In 2022, the full production of the company's own production line was 13500 pieces / year, and the self-sufficiency rate is close to 80%.
At the management level, 1) carry out the first equity incentive. The company issued the stock option incentive plan in mid March 2022. The assessment target is that the operating revenue from 2022 to 2025 will not be less than 14.9 billion yuan, 19.3 billion yuan, 24.1 billion yuan and 30.2 billion yuan, and the compound growth rate of four-year revenue will be 28.12%, higher than that of the industry. It is the first equity incentive since the company was listed, reflecting the company's confidence in its own future development.
2) the information disclosure is more transparent. The company released the business data from January to February at the end of March 2022. From January to February, the company achieved a revenue of about 1.9 billion yuan, with a year-on-year growth rate of about 68%; The net profit attributable to the parent company was about 66.6 million yuan, with a year-on-year growth rate of about 50%. For the first time since the company's listing, the company's more active market communication is expected to convey confidence to investors.
Investment advice
We believe that the fundamentals of the company are excellent, and the operation and management levels have improved. As a global enterprise, facing the extremely unfavorable external environment, the business scale of the company still continues to expand rapidly. On the one hand, the changes in industry demand and pattern have brought historic opportunities to Chinese module manufacturers. On the other hand, through its own efforts, the company has seized the opportunity and rapidly grown into an industry leader by binding Qualcomm to obtain leading genes, continuously investing in R & D and certification, and selecting appropriate market competition strategies. We estimate that the company's net profit attributable to the parent company from 2022 to 2023 will be 561 million yuan and 935 million yuan (the previous value is 635 million yuan and 1036 million yuan), and the new forecast is that the net profit attributable to the parent company in 2024 will be 1.41 billion yuan. The corresponding EPS is divided into 3.86 yuan, 6.43 yuan and 9.70 yuan. The current share price corresponding to PE from 2022 to 2024 is 37.59x/22.55x/14.95x respectively. Considering that the company's valuation has been fully adjusted with the market, the rating is raised to "buy".
Risk tips
1) the global IOT chip supply and demand gap is difficult to improve in the short term, affecting the stability of supply; 2) The improvement of operation and management is not as expected; 3) The demand for downstream vehicle mounted and 5g modules was lower than expected.
