High-end manufacturing business is picking up, and Shenzhen Technology's performance continues to grow
Shenzhen Technology 1H21 had revenue of 7.955 billion yuan (YoY: 14.4%), and the net profit of the mother was 273 million yuan (YoY:
42.3%), of which 2Q21 revenue was 4.128 billion yuan (YoY: 13.7%, QoQ: 7.9%), and net profit attributable to the mother was 73 billion yuan (YoY: -34.0%, QoQ: -63.5%). We are optimistic that the company will deepen its core growth momentum through the integration of consumer electronics and communications services and the introduction of production capacity in the storage and testing business, maintaining the company's net profit forecast for 21/22/23 of 10.64/15.08/1,881 billion yuan, and maintaining the forecast that the company's EPS for 21/22/23 will be 0.68/0.97/1.21 yuan. Wind is unanimous in expecting an average PE value of 25.59 times that of comparable companies in '21. We maintain the PE forecast of Shenzhen Technology 34 times that of '21. The target price is 24.48 yuan, maintaining the purchase rating.
The decline in profit in 2Q21 stemmed from an increase in the share of low gross margin business and the impact of expenses on 1H21 revenue growth mainly due to the recovery in high-end manufacturing business: 1) the continuation of the fight against the epidemic and the recovery in conventional demand led to an increase in medical product orders; 2) several automotive electronics products entered mass production, but the consumer electronics business still did not perform well. At the same time, the growth of high-end storage but the decline in hard disk data storage led to stable performance of the storage business. Due to an increase in the share of high-end manufacturing business but low gross margin, 1H21 gross margin fell 2.7pct to 8.95% year on year. In addition, the company's 1H21 sales expenses and management expenses increased significantly (46.7% and 42.4% respectively), mainly due to the increase in export sales freight charges and Shenzhen Technology Huizhou's payment of 56 million yuan in employee relocation and placement fees. At the same time, the benefits of maturing delivery of financial derivatives were reduced, which ultimately led to a decline in profits.
Pay attention to the performance elasticity of the Hefei Payton project after production expansion is completed
The company's high-end storage and testing production capacity remains at full capacity. The company raised 1,474 billion yuan in non-public offerings during the year, making every effort to expand high-quality production capacity and promote the Hefei Payton Storage Project. The first phase of the project was successfully capped in June of this year. It strives to have an effective production capacity within the year. At full production, it can measure 48 million DRAMs per month, 3.2 million NAND devices, and 2.46 million memory modules. At the same time, hard disk data storage is also expected to pick up in the second half of the year. 1H21's business profit declined slightly due to the phased adjustment of the product structure of the closed testing business, the increase in R&D investment, the preparation of Hefei Payton Storage Company, and the formation of a talent team.
In the long run, the storage business will reshape the company's performance and drive an increase in the company's gross margin and ROE.
Consumer electronics asset integration continues to advance and business structure optimization
During the reporting period, the company continued to promote asset integration matters in the communications and consumer electronics business. The company has terminated the “Notice Concerning Foreign Investment to Establish a Shareholding Company and Integrating Communications and Consumer Electronics Business” signed on February 25, '21, and re-signed a new investment agreement with Guilin Hi-Tech Group on June 18 to establish Bosheng Technology. The integration of communications and consumer electronics businesses continues to advance.
Risk warning: The prosperity of the semiconductor industry falls short of expectations; the progress of domestic memory replacement falls short of expectations.
