Tongling Co., Ltd. (301168)
Event: on April 25, 2022, the company released the annual report of 2021. The company achieved annual revenue of 1.132 billion yuan, a year-on-year increase of + 34.27%; The net profit attributable to the parent company was 80 million yuan, a year-on-year increase of – 17.25%; Deduct the net profit not attributable to the parent company of 75 million yuan, a year-on-year increase of – 21.65%; The basic earnings per share is 0.89 yuan. The gross profit margin of the company in 21 years was 15.40%, down 6.92pcts year-on-year. The rise in the cost of raw materials such as cables, diodes and plastic particles has put pressure on the gross profit margin. It is expected that the price of raw materials will return to rationality in the second half of 22 years. According to the 22q1 quarterly report, the company achieved a revenue of 313 million yuan in Q1, a year-on-year increase of + 15.55%; The net profit attributable to the parent company was 15 million yuan, a year-on-year increase of – 43.53%; Deduct non net profit of RMB 13 million, a year-on-year increase of – 53.08%. The sharp decline in net profit is mainly due to the continuous high upward trend of the purchase price of raw materials and the pressure on the gross profit margin of the company’s main products.
China’s leading enterprise of junction box, closely supporting leading customers. The company is one of the largest junction box enterprises in China. Its products have obtained the technical certification of various authoritative institutions at home and abroad, with a market share of about 12%. Downstream customers include Longji, Trina Solar, Jingao, Hanhua and other major photovoltaic leading enterprises at home and abroad, and the cooperation time is more than 5 years, and the cooperation relationship is relatively stable. After the listing of the company, through the raised investment project, the annual output of 45 million sets of chip pouring module junction box will be increased after completion, which is expected to continuously improve the market share.
The junction box is in short supply, and the company’s profit is expected to be repaired. In 2022, due to the high prosperity of photovoltaic installation, the supply of chip diode products required for superposition junction box is relatively limited, and the photovoltaic junction box enters the state of short supply. Since the end of the first quarter, the price rise cycle of relevant junction box products in the industry has been started, and the company is expected to realize profitable repair. The company is closely matched with some domestic chip manufacturers, and the supply of chip products is sufficient, which is expected to increase the market share.
Shipments increased year-on-year, and chip junction boxes accelerated. Compared with the diode junction box, the chip junction box has the advantages of large current carrying capacity, good heat dissipation and high automatic production level. The average selling price is about 20 pieces / set, and the gross profit margin is 5-10pcts higher than that of the ordinary split junction box. In 2021, the company shipped 6.699 million sets of chip junction boxes, a year-on-year increase of + 15.43%; Diode junction boxes shipped 435162 million sets, a year-on-year increase of + 20.88%. At present, Hanhua new energy, REC, Trina Solar Co.Ltd(688599) , Ja Solar Technology Co.Ltd(002459) and other major customers have completed the sample test of chip junction boxes, and basically entered the stage of large-scale product procurement. In Q1 of 22, the company’s production capacity reached 200000 sets / day, and about 14 million sets were shipped. Affected by the epidemic, the logistics has been delayed. It is expected that the shipment of some products will be delayed to the second quarter.
Internet products are expected to become a new performance growth point. In 2021, the sales revenue of Internet harness reached 12 million yuan, a year-on-year increase of + 188.10%. The company’s photovoltaic interconnection harness is mainly used in series parallel interconnection systems of various photovoltaic Cecep Solar Energy Co.Ltd(000591) ground and surface centralized power stations and household distributed power collection lines. At present, the interconnection harness products have better insulation and stronger tolerance than competitive products, and are expected to become a performance growth point in the future.
Investment suggestion: we expect the company to achieve revenue of 1.496/2.105/2.732 billion yuan from 2022 to 2024, and the net profit attributable to the parent company is 134 / 224 / 313 million yuan respectively. The corresponding PE multiple of the stock price on April 26 is 24x / 14x / 10x. The company is a leading enterprise in the link of junction box. At present, the supply of junction box is in short supply, the profit is expected to be repaired, and the “recommended” rating is maintained.
Risk tips: raw material supply and price fluctuations, intensified market competition, etc.
