Key investment points
Comparative origin: the business model of the optical industry is good. Due to its unique value, there is a long-term need for upgrading at the user end. It has a rare logic of simultaneous increase in volume and price in electronic products, which has attracted extensive attention of investors. Shunyu optical technology and Will Semiconductor Co.Ltd.Shanghai(603501) (hereinafter referred to as "Shunyu" and "Weill") are the leaders in the field of optical parts. The downstream demand, business structure, growth logic and valuation system are similar, and the profit volume in 2021 is similar. We think it has strong comparative research value.
Driving factors: resume the market of the past few rounds. As "similar assets", the capital market performance of the two companies converges. The main driving factors during the rise period are: the trend of mobile phone multi camera and the increase of performance brought by the wave of automobile intelligence, and the company has entered new customers / expanded new categories / upgraded product structure; The main driving factors during the decline are: the weakening of the overall demand of the industry, the damage of customers, the intensification of industry competition, the lower than expected high-frequency shipment data, etc.
Discussion on excess return: in the case of overall convergence, running out of excess return is particularly worthy of attention. Since 2019, we have repeatedly deducted the new market increment for at least 2-3 years, and each time we have made a significant contribution to the new market. At the same time, the company's operating data (such as Shunyu's monthly shipment data) is more effective. The market is very sensitive to the prosperity represented by the shipment and will give feedback quickly.
Fundamental comparison: 1) market space: without considering other businesses of Weill, Shunyu's downstream market space is broader. Among many downstream, automobile is the largest incremental source. 2) Competition pattern: the competition pattern of Weill is better than that of Shunyu, the share of mobile terminal is relatively stable, and there is still room for improvement in the downstream of automobiles. 3) Profitability: determined by product characteristics, competition pattern and other factors, the overall profit margin of Shunyu is lower than that of Weill. Historical comparison shows that the profitability of the two companies is expected to continue to improve. 4) Proportion of long-term non mobile phone business: the proportion of Shunyu's overall mobile phone business is higher than that of Weill, but it will narrow the gap with a rapid decline. We expect that by 2025, the proportion of revenue of Shunyu mobile phone business is expected to be close to 50%, and the proportion of profit end will be earlier than 50%.
Valuation comparison: after disassembling the share price contribution factors of the two companies, it can be found that 1) the trend of valuation and profit changes is the same in most cases, 2) the change of share price is more affected by valuation, and 3) the growth rate or growth expectation determines the valuation level of the company.
Investment suggestion: we believe that the current market adjustment has included extremely pessimistic expectations about the decline in mobile phone demand (15% in 2022) and sluggish automobile consumption. With the digestion of industry inventory coming to an end and the promotion of resumption of work and production in Shanghai and other places, the company's performance in the second half of the year is expected to gradually exceed expectations. At present, the company's valuation has been basically adjusted in place. Looking forward to the future, there is still large growth space on the demand side. We are optimistic about the optical track with thick snow on Changpo and continuous upgrading. We recommend Shunyu optical technology and pay attention to Will Semiconductor Co.Ltd.Shanghai(603501) .
Risk tip: optical upgrade risk slowing down; Risk that smartphone shipments continue to fall short of expectations; Risk of slower than expected progress of automobile business
