\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 47 Nanjing Quanxin Cable Technology Co.Ltd(300447) )
Event overview
The net profit of the parent company was RMB 4.071 billion, a year-on-year increase of RMB 4.071 billion, and the net profit of the parent company in 2021 was RMB 4.071 billion, a year-on-year increase of RMB 4.071 billion, a year-on-year increase of RMB 4.071 billion. In the first quarter of 2022, the revenue was 304 million yuan, a year-on-year increase of 40.62%, the net profit attributable to the parent was 55 million yuan, a year-on-year increase of 41.06%, and the net profit not attributable to the parent was 52 million yuan, a year-on-year increase of 36.90%.
Analysis and judgment
Downstream demand grew steadily, and the company’s performance maintained a high growth rate.
In 2021, the company achieved a revenue of 940 million yuan (+ 31.88%), the market scale of military supporting products was expanded, and some models of products were supplied in batches. The company actively adjusted the product structure, the products of basic business and integrated business showed a growth trend, and the revenue of high-performance transmission cables and components (basic business) was 710 million yuan (+ 40.82%), Photoelectric system and FC products (integrated business segment) achieved revenue of 218 million yuan (+ 41.25%).
In 2021, the company realized a net profit attributable to the parent company of 163 million yuan (+ 17.71%), deducting a net profit not attributable to the parent company of 157 million yuan (+ 43.81%). The performance growth was mainly due to the strong downstream demand and the mass production of some new models of products of the company; The growth rate of net profit attributable to the parent company is lower than that of revenue, which is mainly due to the significant reduction of income tax expenses after deduction of unrecognized deferred income tax assets in the early stage in 2020, resulting in the increase of non recurring profits in the current period; The growth rate of net profit deducted from non parent company is higher than that of revenue, indicating that the profitability of the company has been improved. In 2022q1, the revenue was 304 million yuan (+ 40.62%), the net profit attributable to the parent company was 54.83 million yuan (+ 41.06%), and the net profit not attributable to the parent company was 51.94 million yuan (+ 36.90%), which continued the good growth trend of last year.
The gross profit margin of the company was stable as a whole, and the forward-looking indicators increased significantly.
The comprehensive gross profit margin in 2021 and 2022q1 was 46.46% and 44.89% respectively, down 0.90pct and 3.06pct respectively compared with the same period of the previous year, mainly due to the slight decline caused by the adjustment of product structure, which was at a relatively stable level as a whole. In 2021, the company’s period expense rate was 25.26% (- 1.33pct), of which the sales expense rate, management expense rate, R & D expense rate and financial expense rate were 4.82%, 12.00%, 7.71% and 0.74% respectively, with a year-on-year increase of -0.39pct, + 0.23pct, -0.96pct and -0.21pct. During 2022q1, the company’s expense rate was 21.25% (- 1.56pct), of which the sales expense rate, management expense rate, R & D expense rate and financial expense rate were 3.04%, 10.30%, 6.72% and 1.19% respectively, with a year-on-year decrease of -0.62pct, -2.07pct, + 0.79pct and + 0.35pct. The management expense rate decreased significantly and the level of expense control improved strongly.
At the end of 2021, the company’s inventory was 559 million yuan (+ 64.41%), accounts receivable was 422 million yuan (+ 30.25%), accounts payable was 259 million yuan (+ 76.19%), and contract liabilities were 49 million yuan (+ 600%). In 2022q1, the inventory further increased to 602 million yuan, and the accounts receivable increased to 654 million yuan. The significant growth of forward-looking indicators showed that the company had full orders and actively prepared for production and goods, highlighting the high prosperity of the industry.
Wholly owned Shanghai Saizhi, the company’s profitability is expected to improve.
In March 2022, the company signed the equity transfer agreement with the minority shareholders of Shanghai Saizhi to acquire 39.07% equity of Shanghai Saizhi at the price of RMB 46.1 million. After the acquisition, Shanghai Saizhi became a Nanjing Quanxin Cable Technology Co.Ltd(300447) wholly-owned subsidiary. This acquisition is based on the gradual expansion and rapid growth of the application field of FC optical fiber bus series products, further improve the capital investment in the field of FC optical fiber bus technology, and expand the production scale of relevant products, so as to fully meet the growing market demand in the future and enhance the core competitiveness. Shanghai Saizhi is a high-tech enterprise specializing in the design, R & D and manufacturing of FC optical fiber bus series products. It is mainly engaged in the R & D, production and sales of optical fiber bus switching system. The company’s products are mainly used in the fields of aviation, aerospace and shipbuilding. In 2021, Shanghai Saizhi achieved a revenue of 94.67 million yuan, a net profit of 24.5 million yuan and a net interest rate of 25.87%, which is significantly higher than the overall net interest rate of the company of 18.40%, The wholly-owned holding will help to thicken the company’s performance and improve profitability.
In the field of FC optical fiber bus, the company has arranged the localization research and development of FC optical fiber bus products in advance, and has completed the development and market promotion of national produced optical fiber channel node card series products, which has been fully recognized and widely used in the military industry market; Complete the unified design of 4G / 8g rate fiber channel switch series products produced in China, and obtain the model matching opportunity of airborne and ship multi-type equipment; The national production and higher speed FC switch with independent and controllable core technology has been successfully developed and installed, marking the expansion of the company’s batch FC products from the original communication sub card terminal equipment to the whole FC network equipment. In terms of FC optical fiber bus market expansion, the company adheres to the development idea of continuing to deeply cultivate the advantageous markets of aviation and ships and expand the markets in emerging fields such as aerospace and weapons, focuses on the development of equipment in the 14th five year plan, and quickly realizes the large-scale and industrialized development of FC bus industry. In 2021, FC products will be matched with an important strategic model in the aerospace field for the first time.
A fixed increase of 320 million yuan was raised to invest in multiple projects, and the production capacity ushered in expansion.
According to the “14th five year plan”, the company continued to strengthen the construction of production capacity, and improved the comprehensive delivery capacity by means of production line expansion, equipment automation transformation and MES production informatization, so as to ensure the delivery and supporting tasks of many national key models. In 2021, the company raised 320 million yuan in private placement, mainly for capacity expansion according to the demand and expectation of the downstream market, and mainly invested in “production project of high-performance cables for aerospace and data cables for rail transit”, “production project of integrated harness and photoelectric system integration products” and “production project of FC optical fiber bus series products”. After the completion of the raised investment project, the annual income is expected to increase by 1.529 billion yuan, The new net profit is 234 million yuan. The construction of the new production line base is being stepped up and is expected to be put into operation gradually in 2022. The prosperity of the demand side industry continues to improve, and the capacity expansion of the supply side company is superimposed on the profit improvement expectation. It is expected that the company’s performance will maintain a high growth rate in the next few years.
Focusing on the field of military electronic information, the expansion of civilian products has achieved initial results.
In the field of military products, since its establishment, the company has always focused on military industry business and focused on the field of military electronic information. It is mainly engaged in the R & D, production, sales and service of military photoelectric cables and components, photoelectric components, FC optical fiber high-speed network and multi protocol network solutions, photoelectric system integration and other series of products.
The company’s products are mainly used in five military industries: aviation, aerospace, ships, electronics and weapons: aviation is mainly used in military aircraft such as fighter aircraft, helicopter, transport aircraft, early warning aircraft and UAV; The aerospace field is mainly used in rockets, satellites, missiles and manned spacecraft; The field of ships is mainly used in surface and underwater ships and various auxiliary ships; In the field of electronics and weapons, it is mainly used in electronic systems such as communication, radar, electronic countermeasure, navigation and so on. 2021 is the first year of the 14th five year plan. Under the influence of the macro international situation, due to the favorable conditions of some national key models entering the batch production stage, the order volume has increased greatly.
In the field of civil products, the company actively expands the market of commercial civil products such as rail transit, railway construction, commercial aircraft and 5g communication. In 2021, the company made significant progress in the localization of rail transit and commercial aircraft: the products passed the on-site audit of experts from China railway inspection and certification center and the full performance test of the third-party inspection organization, and obtained the trial certificate of CRCC railway product certification; Complete COMAC’s on-site audit and product performance test, successfully enter COMAC’s QPL qualified supplier directory, and start small batch supply. By reserving production capacity in advance, optimizing management and business processes and adapting to the rapid response mechanism of civil products, the company has been widely recognized by CRRC, China Railway Construction Heavy Industry Corporation Limited(688425) , China railway equipment, COMAC and other customers, established a good image and laid a solid foundation for subsequent market expansion.
Investment advice
The company is the core supplier of China’s military transmission cables and components and optoelectronic systems. It has rich research and development experience and advanced professional technology in relevant fields, and benefits from the background of military informatization and domestic substitution. Considering the continuous improvement of the prosperity of the demand side industry and the improvement expectation of the supply side company’s capacity expansion and profit, we adjusted the company’s revenue forecast from 1.214/1.657 billion yuan to 1.286/1.706 billion yuan in 20222023, and EPS from 0.80/1.16 yuan to 0.78/1.09 yuan. It is expected to achieve revenue of 1.286/17.06/2.192 billion yuan in 20222024, net profit attributable to the parent company of 2.43/3.40/438 million yuan and EPS of 0.78/1.09/1.40 yuan, Corresponding to the closing price of 15.51 yuan / share on April 29, 2022, PE is 20 / 14 / 11 times respectively, maintaining the “buy” rating.
Risk tips
The production progress of the raised investment project is less than expected; The business demand of FC optical fiber bus is less than expected; The expansion progress of civil field is less than expected
