\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a revenue of 5.656 billion yuan, a year-on-year increase of + 43.20%; The net profit attributable to the parent company was 1.491 billion yuan, a year-on-year increase of + 146.21%; Deduct the net profit not attributable to the parent company of RMB 1.381 billion, a year-on-year increase of + 169.26%. In a single quarter, the revenue of 2021q4 was 1.408 billion yuan, a year-on-year increase of + 60.25% and a month on month increase of – 1.64%; The net profit attributable to the parent company was 535 million yuan, a year-on-year increase of + 116.67% and a month on month increase of + 21.56%; Net profit deducted from non parent company was 460 million yuan, with a year-on-year increase of + 126.21% and a month on month increase of + 7.52%. In 2022q1, the company’s revenue was 1.886 billion yuan, a year-on-year increase of + 44.16% and a month on month increase of + 33.95%; The net profit attributable to the parent company was 607 million yuan, with a year-on-year increase of + 146.21% and a month on month increase of + 13.47%; Deduct the net profit not attributable to the parent company of 591 million yuan, a year-on-year increase of + 150.83% and a month on month increase of + 28.29%.
Income statement: if the one-time provision of 233 million yuan of out of plan expenses for retirees in 2021 and 246 million yuan of impairment provision for Shenzhen communication and Zhenhua new energy in 2020 are restored, the actual operating net profit of the company in 2021 will be 1.724 billion yuan, a year-on-year increase of + 103%. Revenue side: as the main source of revenue of the company (accounting for 99.43%), the revenue of new electronic components increased by 43.50% year-on-year in 2021, mainly due to the significant growth of downstream demand for military electronic components.
Gross profit margin of the company: 202782% year on year; The net interest rate was 26.36%, with a year-on-year increase of + 11.11pct. The increase in gross profit margin was mainly due to the increase in the proportion of high value-added products and the superposition of scale effect. The proportion of raw materials, labor wages, depreciation, energy and other costs in revenue decreased by 2.54, 1.54, 0.68, 0.50 and 1.98pct respectively year-on-year. The increase in net interest rate was mainly due to the significant decrease in asset + credit impairment loss (accounting for a decrease of 6.00pct in revenue). In addition, the rate of sales, R & D and financial expenses decreased by 1.34, 1.86 and 0.28pct respectively year-on-year, and the rate of management expenses increased by 2.40pct year-on-year, mainly due to the significant increase in one-time non overall expenses and performance rewards.
Balance sheet: multiple items indicate that the company will usher in high growth in the future. 1) Prepayment: it was 203 million yuan at the end of 2021, an increase of 64.04% over the beginning of the year, and increased to 270 million yuan in 2022q1, indicating that the company increased the purchase of raw materials to cope with the growth of downstream demand. 2) Contract liabilities: at the end of 2021, it was RMB 214 million, an increase of 525.75% over the beginning of the year, indicating that the company received a significant increase in advance payments from customers. 3) Notes payable and accounts payable: it was 1.340 billion yuan at the end of 2021, an increase of 43.90% over the beginning of the year, and increased to 1.528 billion yuan in 2022q1, indicating that the company increased the purchase of raw materials to cope with the growth of downstream demand.
As a leading enterprise of China’s military electronic components, in addition to the substantial growth of the annual performance in 2021, the company’s single quarter performance in 2021q4 and 2022q1 also showed a significant year-on-year growth and continuous month on month growth. On the one hand, we believe that this is the embodiment of the improvement of governance structure brought by the growth of downstream demand for military electronics, the increase of sales of high value-added products and the implementation of equity incentive on the performance side; On the other hand, as the headquarters of China’s military electronics industry, the company’s performance has further verified the high outlook of the military industry. 1) Military passive components business: benefiting from the large-scale loading of downstream weapons and equipment, the improvement of localization rate and national defense informatization rate, it will achieve continuous growth in 2021, and new products continue to achieve breakthroughs in R & D and application. Performance: zhenhuafu (mainly engaged in inductors, filters and transformers) achieved a revenue of 713 million yuan in 2021, a year-on-year increase of + 40.39%; The net profit was 312 million yuan, a year-on-year increase of + 74.56%. Zhenhua Yunke (mainly engaged in resistors and ceramic capacitors) achieved a revenue of 787 million yuan in 2021, a year-on-year increase of + 42.72%; The net profit was 265 million yuan, a year-on-year increase of + 75.44%. Zhenhua Xinyun (mainly engaged in tantalum capacitors) achieved a revenue of 1.092 billion yuan in 2021, a year-on-year increase of + 23.51%; The net profit was 252 million yuan, a year-on-year increase of + 22.87%. R & D and application: in 2021, the company completed the transformation of scientific and technological achievements and mass production of laminated chip solid aluminum capacitors, single-layer ceramic capacitors, LTCC microwave components and other products.
2) other emerging fields such as military semiconductor: the company’s layout in emerging fields such as semiconductor is the main reason for its higher growth rate than that of the same industry. Performance: Zhenhua micro (mainly engaged in hybrid integrated circuits) achieved a revenue of 655 million yuan in 2021, a year-on-year increase of + 67.78%; The net profit was 256 million yuan, a year-on-year increase of + 99.94%. Zhenhua Yongguang (mainly engaged in semiconductor discrete devices) achieved a revenue of 1.033 billion yuan in 2021, a year-on-year increase of + 68.51%; The net profit was 448 million yuan, a year-on-year increase of + 138.22%. R & D and application: in 2021, the company accelerated the R & D of new high-end products such as high-performance Si based IGBT, solid relay, RF transformer and cam rotary switch, broke through key technologies such as high-voltage and high current IGBT chip design and manufacturing, and the performance of many new products reached the level of foreign benchmarking products; EMI power filter, DC / DC power module, etc. form a variety of module samples and provide users with trial; Complete the research and development of three high dielectric LTCC materials and one low dielectric LTCC material, and the performance index is equivalent to the level of foreign benchmarking materials. 3) Strong product expansion ability comes from continuous high R & D investment At the same time, in 2021, in 2021, the leading edge is clear. In 2021, the leading edge of the China Zhenhua (Group) Science & Technology Co.Ltd(000733) electronicpastes and other fields continue to expand their categories.
4) the profitability of the company continues to improve. In 2021, the company’s gross profit margin was as high as 60.82% and net profit margin was as high as 26.36%, both of which were the highest in five years. In 2022q1, the gross profit margin and net profit margin were 62.86% and 32.21% respectively, showing a continuous growth trend. The improvement of the company’s profitability mainly comes from the following two aspects: first, the scale effect brought by the growth of sales of military electronic components; Second, the types of products have been continuously expanded, and the proportion of sales of high value-added products has increased.
Investment suggestion: the company’s performance in 2021 and 2022q1 is still very excellent. At present, the military electronic components industry is still in a period of rapid growth. The company expects to achieve a revenue of 7 billion yuan in 2022, a year-on-year increase of + 23.76%, and a total profit of 2.5 billion yuan, a year-on-year increase of + 42.13%. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.196 billion, RMB 2.852 billion and RMB 3.604 billion, corresponding to the current valuation levels of 23x, 18x and 14x. As the base camp of military electronics and semiconductors under CEC, it has significant valuation advantages and maintains the “buy” rating.
Risk warning: CEC’s change in the company’s positioning; The development of military electronics and other businesses was less than expected.
