\u3000\u3000 Wingtech Technology Co.Ltd(600745) (600745)
We upgraded Wingtech Technology Co.Ltd(600745) (600745. CH) to “buy” and raised the target price for the next 12 months to RMB 146.9, with a potential increase of 21.3%.
Looking forward to 2022, ODM will usher in an inflection point, semiconductors will grow strongly, and optics will begin to contribute profits. For Wentai, in 2021, ODM business was greatly affected by the “lack of core” in the supply chain, which dragged down the profit decline of the business segment. This is also the biggest reason why we maintained the “hold” rating of Wentai. However, we can see that the shortage of key components in the smartphone supply chain has been alleviated since the third quarter of 2021 and further improved in the first and second half of 2022. Therefore, we believe that Wentai ODM’s business will return to the growth track. At the same time, we remain confident in the growth of Wentai’s semiconductor business. The optical business acquired by Wentai has also officially started shipping, and we expect to turn loss into profit in 2022. Wentai’s current P / E ratio is 30.2x, and the valuation is more attractive than five months ago. Therefore, we raised Wentai’s rating to “buy”. Investors are advised to make timely layout in the first quarter of the low point of the smartphone supply chain (refer to 2022 technology outlook).
In 2022, ODM will actively explore new markets and move towards platform assembly. Wen Tai will be one of the Chinese mainland platform based assembly companies. After adjusting the upgrade strategic plan, in addition to mobile ODM, Wentai has expanded its business to non mobile phones and non Android camps, including laptops, TWS headphones and other products. Wen Tai is expected to push the third phase of electronic manufacturing in Chinese mainland, that is, global cross product and cross platform business (refer to Apple iPhone supply chain depth report). Our target P / E ratio of 25.0x for Wentai ODM business in 2022 is significantly higher than the previous 12.5x, which is also an important incremental contribution to our target price increase this time.
In 2022, semiconductor will continue to move forward from cash flow business to growth business. Wingtech Technology Co.Ltd(600745) power semiconductors, especially vehicle specification products, are still in short supply due to the upward prosperity of the semiconductor industry. We expect this situation to continue in 2022, which is consistent with our previous judgment. Looking forward to 2022, the natural growth of the original capacity in Hamburg and Manchester, the gradual introduction of the purchased Newport Fab into its own products and the release of the new capacity in Hong Kong will provide business growth for Wentai. Wentai’s semiconductor business is expected to move forward from cash flow business to growth business.
Investment risk: the demand recovery of the smartphone industry is less than expected, and the recovery time of “core shortage” in the supply chain is long. The prosperity of the semiconductor industry peaked and declined, dragging down the company’s semiconductor product price rise space. The company’s industry competition intensified, resulting in a decline in gross profit margin. The rapid expansion of the company affects the expense rate and cash flow performance
