\u3000\u3000 Dongguan Dingtong Precision Metal Co.Ltd(688668) (688668)
Connector upstream component leader, with outstanding profitability. Founded in 2003, the company focuses on R & D, production and sales of communication and automotive connector precision components. The company's performance maintained rapid growth. According to the announcement of the company's performance pre increase, the company expects to achieve an operating revenue of 568 million yuan in 2021, a year-on-year increase of 58.85%, and a net profit of 109 million yuan, a year-on-year increase of 50.2%; Operating income 3 years cagr40 5%, net profit 3 years cagr33.5% 3%。 The company's profitability continued to be significantly higher than the industry average. The average gross profit margin in the first three quarters of 2021 was 34.8%, higher than the industry average of 8.23pct. In the adverse macro environment of the general rise in raw material prices in 2021, the company maintained a high net interest rate of 19.2%, highlighting its profitability and toughness. The roe level of the company continues to be higher than the industry average. We estimate that the roe of the raised investment project is expected to exceed 20% after the project is completed, so as to further expand the leading range.
The volume and price of new energy vehicle connectors are rising, and the industry growth is expected to usher in an inflection point. Communication and automobile are the largest application scenarios of connectors. According to bishop & Associates, the global connector market sales in 2020 were USD 62.7 billion, of which 23.1% were used in communication and 22.6% in automobile. Automotive connectors are widely used in power system, body system, information control system and so on. New energy vehicles use more electronic products in power, control, sensing, safety and other systems, and the value of connectors continues to increase, driving the growth of automobile connector market. Driven by the rising volume and price of new energy vehicle connectors, bishop & Associates estimates that the global connector market will exceed US $90.4 billion in 2023, with a compound growth rate of 13% (1.4% in the past three years); We expect the market size of Chinese connectors to reach US $40.7 billion in 2023, with a compound growth rate of 18% (9.2% in the past three years). We estimate that the market space of Shanxi Guoxin Energy Corporation Limited(600617) automobile connector is expected to reach 55.5 billion yuan in 2025, with a compound growth rate of 38.4% in the next four years.
The key customer strategy is fully implemented, and it is expected to help expand the customer group after the fund-raising investment project is completed. The company implements the strategy of giving priority to key customers and gives priority to meeting the product needs of major customers under the condition of limited production capacity, so as to fully ensure customer stickiness and the overall profitability of the company. The proportion of the company's supply to major customers continues to increase, reflecting that the company's products are deeply recognized by major customers. In 2020, compared with 2017, the company's supply to Amphenol increased by 150% and the supply to Avic Jonhon Optronic Technology Co.Ltd(002179) increased by 350%. The revenue growth of downstream customers combined with the increase of supply proportion jointly promote the rapid growth of the company's operating revenue. According to the company's announcement, the company's production capacity in Dongguan (with a construction area of 27000 square meters) is close to saturation. As of now, some of the plants in Henan (with a construction area of 96000 square meters) have been completed, and the plants that have been completed are gradually installing equipment. According to the company's announcement, the company has established cooperation with Byd Company Limited(002594) , Phoenix Contact, Nandu power, honeycomb energy and other enterprises, and the automobile connector business has gradually changed from tier2 to Tier1. Under the background of substantial growth in the demand for new energy vehicle connectors, the company is expected to expand more vehicle enterprise customers and cultivate new growth points of the company.
Investment suggestion: the company's communication connector components benefit from the growth of revenue scale and supply proportion of core key customers; Automobile connector components benefited from the increased penetration rate of new energy vehicles, resulting in the increased growth rate of automobile connector industry. The company actively expanded automobile enterprise customers and gradually changed its role from tier2 to Tier1; After the completion of the raised investment project, it is expected to open the capacity constraints, and the company's performance is expected to maintain rapid growth. We expect the company's operating revenue to be RMB 568 / 869 / 1284 million and the net profit attributable to the parent company to be RMB 109 / 1.6 / 260 million in 2021 / 22 / 23. Considering the valuation of comparable companies and the growth rate of the company's net profit, we give the company 45 times PE in 2022, corresponding to the target market value of RMB 7.19 billion and the target price of RMB 84.6. For the first time, it is given a "Buy-A" investment rating.
Risk tip: the production schedule of raised investment projects is less than expected, the expansion process of automobile customers is less than expected, and the order demand of key customers is less than expected
