\u3000\u30 Shenzhen Quanxinhao Co.Ltd(000007) 33 China Zhenhua (Group) Science & Technology Co.Ltd(000733) )
Event: on April 28, the company released the 2021 annual report and the first quarterly report of 2022. Revenue in 2021 (RMB 5.656 billion, + 43.20%), net profit attributable to parent company (RMB 1.491 billion, + 146.21%); 2022q1 revenue (1.886 billion yuan, + 44.16%), net profit attributable to parent company (607 million yuan, + 146321%).
The business of new electronic components continued its high growth trend, and the structural optimization led to the continuous enhancement of profitability. Benefiting from the increased procurement of electronic components by downstream customers due to factors such as new project development and strategic reserves, the industry entered a high-profile stage. The company’s order and delivery volume maintained a rapid growth, and the business scale and benefits reached a record high. The subsidiary of new electronic components realized revenue of the same caliber (4.281 billion yuan, + 45.24%), Net profit (1.533 billion yuan, + 80.17%), of which Zhenhua Yongguang and Zhenzheng Jilin Sino-Microelectronics Co.Ltd(600360) revenue of active components subsidiaries increased by 68.51% and 67.78% respectively, net profit increased by 138.22% and 99.93% respectively, and the proportion in revenue and profit increased to 39.45% and 45.96% respectively. We believe that active components subsidiaries are expected to continue to maintain rapid growth under the continuous high prosperity of demand side and the logic of domestic substitution.
Quarterly, the net profit attributable to the parent company from 21q1 to 22q1 was 247 million yuan, 269 million yuan, 440 million yuan, 535 million yuan and 607 million yuan respectively, showing a steady upward trend. What we think is more noteworthy is that the gross profit margin of the company in a single quarter increased from 53.66% in 21q1 to 62.86% in 22q1 quarter by quarter, mainly due to the company’s continuous optimization of its product structure, transformation and upgrading of existing products and upgrading of production lines, In the context of the continuous improvement of the added value of delivered products, the production efficiency is also improving at the same time; At the same time, the company’s net profit margin increased from 18.93% in 21q1 to 32.21% in 22q1, which is reflected in the continuous improvement of the company’s impairment and period expense rate in the process of continuous upward gross profit margin. Considering that the company’s total capacity is expected to increase by 1.3 billion yuan in 2022, and the company’s total profit is expected to increase by 2.3 billion yuan in 2022, and the company is still in a certain position (considering the current demand of customers, + 2.2 billion yuan, the company is expected to achieve a certain increase of + 2.3 billion yuan in 2022).
The gross profit margin and net profit margin continued to increase, and the profitability was significantly enhanced. In 2021, the gross profit margin increased by 7.25 PCT to 60.82% year-on-year, which is expected to be mainly due to the increase in the proportion of high value-added products and the overall production efficiency after the optimization of the company’s product structure, and we expect that the gross profit margin may still have some room to rise with the continuous increase in the proportion of active component subsidiaries in revenue; Meanwhile, during 2021, the expense ratio of the company decreased by 1.08 PCT to 28.73%, and the credit impairment loss improved from – 230 million yuan in 2021 to 20 million yuan in 2022, further driving the net interest rate to increase by 11.22 PCT to 26.47%.
The balance sheet continued its boom and cash flow improved significantly. In 2021, the prepayment and contract liabilities increased by 63.71% and 529% respectively compared with the beginning of the period, and the reference inventory increased by 68.28% compared with the beginning of the period. Among them, the accounts of raw materials, goods in stock and goods delivered increased by 79.66%, 65.81% and 94.88% respectively. The above accounts reflect the company’s current abundant demand and full orders on hand. It is expected that they will continue to be cashed to the revenue side after delivery and revenue recognition; Meanwhile, the cash received from the company’s sales of goods and provision of labor services in 2021 and the net cash paid for the purchase of goods and acceptance of labor services increased by 174 million yuan year-on-year, driving a significant improvement in cash flow.
Investment suggestion: focusing on the military electronic components business, the company will fully benefit from the deterministic growth of the military industry in the next two years. Relying only on the profit volume of the original military electronics and giving a general valuation of comparable companies, the company can support the market value of 10 billion yuan, while business expansion such as IGBT and thick film integrated circuits is expected to lead to the revaluation of the company’s value. Considering the rapid growth of new electronic components business, it is estimated that the net profit attributable to the parent company from 2022 to 2023 will be 2.23 billion yuan and 2.8 billion yuan respectively, and the corresponding PE will be 22 and 18 times respectively, maintaining the “Buy-A” rating.
Risk tip: military orders are less than expected
