\u3000\u30 China High-Speed Railway Technology Co.Ltd(000008) 10 Skyworth Digital Co.Ltd(000810) )
Event: Skyworth Digital Co.Ltd(000810) released the first quarterly report of 2022. In 2022q1, the company realized revenue of 2.77 billion yuan, yoy + 24.8%; The performance was 210 million yuan, yoy + 33.7%. The company’s position in the set-top box market is stable, and the set-top box business continues to recover. With the rapid development of global IP, broadband and intelligent vehicle display, the company’s emerging businesses such as network connection equipment, virtual reality VR and vehicle display are expected to grow rapidly.
The set-top box and broadband connection services have driven the rapid growth of Q1 Revenue: 1) the set-top box business of Q1 has maintained rapid growth. China’s set-top box industry is developing rapidly towards 4K and 8K. The overseas digital set-top box industry is developing towards digitization and HD, and the global demand for the upgrading of set-top boxes is improving. According to Gran research, the global set-top box shipment in 2021 was yoy + 11%. The company is a global leader in the set-top box industry, benefiting from the rapid recovery of the set-top box industry. 2) Q1 broadband connection services are growing rapidly. The comprehensive deployment of digital economy and Gigabit broadband + 5g network has continuously promoted the upgrading of China’s network connection equipment. In 2021, the company comprehensively broke through the three major telecom operators in China and won a considerable share in the centralized procurement project of broadband connection equipment. In 2022, the company continued to deepen cooperation with the three major operators in China. In January 2022, the company won the second bid for the emergency centralized purchase project of China Telecom Corporation Limited(601728) group broadband convergence terminal (2021).
The pressure on raw materials eased and the gross profit margin in Q1 increased: the gross profit margin of the company in Q1 increased by 0.8pct year-on-year in a single quarter.
Since 2021q3, DDR storage prices, an important part of the company’s set-top box, have continued to fall. According to wind data, the spot price of DRAM in 2022q1 was yoy + 0.6%, with a year-on-year increase narrowed by 54pct compared with 2021q1. Q1 company’s gross profit margin increased year-on-year, mainly because 1) the company’s price transmission to operators was smooth and effectively responded to the pressure of rising costs; 2) As an industry leader, the company has strong bargaining power on the upstream and reduces the cost of the supply chain. In the future, as DRAM prices stabilize and fall, the company’s profitability is expected to be further improved.
Q1 single quarter profitability increased year-on-year: the company’s Q1 net interest rate was 7.5%, up 0.5 PCT year-on-year; The net profit deducted from non parent company is about 200 million yuan, yoy + 228.8%. The net interest rate of Q1 company increased year-on-year, mainly due to 1) the company strengthened cost control, and the total cost rate of Q1 sales, management and R & D decreased by 1.5pct year-on-year; 2) Q1 the interest income of the company increased and the exchange loss decreased. Q1 financial expenses decreased by 0.8pct year-on-year.
Q1 net cash flow from operating activities decreased year-on-year: the company’s Q1 net cash flow from operating activities decreased by – 20 million yuan year-on-year.
We believe that the main reason is that the company has strengthened the preparation of goods based on the judgment of the supply of raw materials such as memory.
Q1 company’s cash paid for purchasing goods and receiving labor services was + 600 million yuan year-on-year.
Investment suggestion: the company is a leader in China’s set-top box industry, with leading technology and customer advantages. The company has a stable position in the set-top box market, and the broadband network communication connection equipment will usher in development opportunities. We expect the company’s EPS from 2022 to 2024 to be 0.72/0.97/1.14 yuan respectively, maintaining the Buy-A investment rating.
Risk tip: the price of raw materials has risen sharply, and the progress of policy implementation is slower than expected
