\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 27 Sino Wealth Electronic Ltd(300327) )
The company released the performance report for the first quarter of 2022. The company achieved a revenue of 464 million yuan in 2022q1, a year-on-year increase of + 51.44%; The net profit attributable to the parent company was 128 million yuan, a year-on-year increase of + 89.29%. The single quarter performance is at the upper limit of the revised performance forecast. The influencing factors include full orders of main product lines, a slight increase in gross profit margin compared with the same period last year, an increase in government subsidies and early delivery of some customers.
The tight supply of production capacity restricts growth, and the key breakthroughs in resource allocation DDIC and BMIc. Under the background of insufficient supply of upstream agent factories, the company strategically gave up products with low price and low gross profit margin by reasonably allocating production capacity, so as to ensure large customers and rapid growth of DDIC and BMIc business, and achieved steady growth of performance in 2021. In 2021, the sales volume of the company’s products was about 713 million, with a year-on-year increase of 12.69%. In terms of revenue structure, the revenue of consumer electronics business represented by DDIC increased by 105.66% to 327 million yuan, accounting for 21.89% of revenue. The company’s AMOLED chip “FHD +” mobile phone screen new product has been mass produced and adopted by many panel factories. At the same time, wearable products have also entered the brand market; Lithium battery management chip has made a breakthrough in customer promotion and mass production of China’s head mobile phone brand.
Prepayment transformation and process migration will lock in the capacity growth next year in advance. The company significantly increased the capacity margin for upstream suppliers in 2021q3, reaching 290 million yuan, an increase of 275 million yuan month on month. This part has been carried forward in 2021q4, indicating that it has entered the substantive contract stage with the upstream OEM, and some of its capacity has been implemented at the beginning of the year. At the same time, some of the company’s product lines gain competitiveness and cost advantages by migrating to the 12 inch line, so as to ensure the stability of production capacity and profitability.
Investment advice. We expect that the domestic substitution and large volume of new products will boost the growth center of the company in the future, and the conversion of advance payment into real production stage will alleviate the company’s capacity bottleneck. It is estimated that from 2022 to 2024, the company will achieve revenue of RMB 2.082/2.659/3.270 billion, net profit attributable to the parent company of RMB 503/6.16/738 million, corresponding EPS of RMB 1.62/1.98/2.37 respectively, and current share price corresponding PE of 34 / 27 / 23 times respectively. With reference to the valuation level of comparable peer listed companies, the company is given a valuation range of 35-42 times in 2022, corresponding to a reasonable price range of 56.70-68.04 yuan in 2022. Maintain the “prudent recommendation” rating.
Risk tip: the demand is less than expected, the market competition is fierce, and the price of upstream raw materials fluctuates.
