\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 27 Sino Wealth Electronic Ltd(300327) )
Key investment points
With the superposition of the impact of the epidemic and the increase of R & D investment, the performance is still strong and growing month on month. The company issued Q1 performance announcement: the revenue was 464 million yuan (industrial control IC accounted for about 80% and consumer electronics IC accounted for about 20%), a year-on-year increase of + 51% and a month on month increase of + 16%; The net profit attributable to the parent company is 128 million yuan, which is higher than the median value of the revised forecast range (3 / 31 the company issued the performance forecast revision announcement, and the forecast range of net profit attributable to the parent company was increased to 122132 million yuan due to the receipt of 20.25 million government subsidies), with a year-on-year increase of + 90% and a month on month increase of + 25%; Deduct non RMB 110 million, which is higher than the median value of the revised forecast range, with a year-on-year increase of + 88% and a month on month increase of + 7%. Q1 gross profit margin was 47%, year-on-year + 2.37pct, month on month -2.63pct; The net interest rate was 27%, with a year-on-year increase of + 5.42pct and a month on month increase of + 1.67pct. Affected by the epidemic, the company’s important foundry and ship technology stopped work for 11 days in February, which had a slight impact on the wafer output of Q1 and Q2, and the impact on the company’s annual revenue was less than 3%. At the same time, customers were worried about the epidemic in Shanghai, so they took orders in the first week of April at the end of March in advance, and the revenue realized in advance accounted for less than 5% in Q1. In addition, the company increased R & D investment, and the R & D cost in Q1 was 81.325 million yuan, a year-on-year increase of + 35.1%. R & D focused on industrial control and automotive MCU, iiot chip, OLED display driver chip and new products. At the same time, the company announced that it plans to distribute a cash dividend of 4.80 yuan (including tax) for every 10 shares to all shareholders and increase one share for every 10 shares with the capital reserve.
Orders are sufficient in 2022, and the production capacity is expected to increase quarter by quarter. From the demand side, the market share of beneficiary companies has increased, the company has sufficient orders, and the order demand of main product lines is still strong compared with previous years. In the application market of the company’s main products, the penetration rate of domestic chips is still low, and the company has long-term sustainable development space. From the supply side, the production capacity in 2021 restricts the company’s growth, and the production capacity in 2022 is still the key bottleneck of performance growth. 2021q3 company guarantees the production capacity by paying large advance payment and guarantee deposit. It is expected that the new production capacity will increase quarter by quarter this year, and the company will continue to focus on the production capacity increase. In terms of the impact of the epidemic, the current covid-19 epidemic has little impact on the company’s production and sales. Only some packaging and testing plants with a low proportion may delay shipment due to the impact of the local epidemic. The R & D personnel of the company in Shanghai have adopted the remote office mode.
Power management: products in short supply, leading technology in the mainland, and multi-point flowering in downstream applications. The requirements of lithium battery management chip for metering technology continue to improve, and the company continues to maintain the leading position in the mainland. From the downstream application of the product: 1) mobile terminal: last year, it successfully developed Chinese top brand customers, made a breakthrough in mass production, and will continue to maintain rapid growth in the future. 2) Power battery: the company occupies the mainstream position in the electric bicycle control IC market, and will benefit from the vehicle change tide brought by the implementation of the new national standard electric bicycle and the development of Shanxi Guoxin Energy Corporation Limited(600617) energy storage market in China. 3) Laptop: laptop products have high requirements and long certification cycle. The company’s products have been recognized and adopted by major brand manufacturers. They are in the growth period of domestic substitution. With the growth of demand for medium and high-end computer peripherals, the company will continue to benefit. The potential market size reaches 8 billion yuan, the market share of the company is only single digits, and the company has broad room for improvement.
MCU: it is inclined to everyone’s power, with strong demand and limited growth of production capacity. The competition pattern of large household appliances is better than that of small household appliances. Last year, the production capacity was limited and inclined to large household appliances. The specific applications are as follows: 1) large household appliances: there is a serious shortage of MCU in 2021. The company is the main choice for Chinese white household appliance manufacturers to replace domestic products. This year, it will continue this trend and achieve a breakthrough in mass production in the field of frequency conversion. Overseas Renesas, NEC, STM, Ti and other companies monopolize all power MCU, and the company’s share is only 10%. The localization rate of white power MCU in mainland China is low, while overseas manufacturers prefer automotive electronics. It is expected that there will continue to be out of stock this year, the localization process will be accelerated, and the company’s market share is expected to continue to increase. 2) Small household appliances: take the lead in mass production of 32-bit MCU in the large client of small household appliances. It is expected that the supply and demand of MCU market of household appliances and kitchen appliances will tend to be balanced. With high-quality products and services, the company’s income of small household appliances will continue to expand. From the perspective of technology research and development, the company actively develops the research and development of 55 / 40nm and 12 inch wafer process, and the first 55nm home appliance master MCU has been promoted.
Display driver chip: AMOLED has a broad market space in China, and entering the brand market brings new impetus. Previously, the company mainly focused on the maintenance market, and now develops brand customers to open up new growth space. The company’s AMOLED products are mainly aimed at China’s AMOLED screen factory. The market is mainly dominated by Korean and Taiwan manufacturers. It has the characteristics of large volume of single products and low gross profit margin. The company has its own core technology and IP self-development, has low cost advantages, and can provide fast services for Chinese customers. AMOLED display screen has gradually become the mainstream of mobile phones. Chinese brands have increased the proportion of domestic screens. The growth trend of domestic AMOLED screen market is clear, and the company will enjoy the growth dividend of Chinese market.
Investment suggestion: the company is the absolute leader of home appliance MCU in mainland China. The 8-bit MCU ecology is completely self-made, and there is still more than 20% room to improve the share of household appliances. Expand the layout of vehicle regulation MCU into high-end applications. AMOLED drive and power management have been laid out for many years, and enter brand customers to open growth space. Looking at vehicle regulation MCU for a long time, AMOLED drive and power management will enter the automotive market. At present, the supply of products is in short supply, and the layout of production capacity ensures growth. It is estimated that the net profit in 2022, 2023 and 2024 will be RMB 530, 7.6 and 1.07 billion respectively, corresponding to 32 / 22 / 16 times of PE, maintaining the “buy” rating.
Risk warning event: the risk that downstream demand is less than expected and capacity supply is less than expected.
