3Q21's revenue hit a record high, and its profitability declined slightly compared with the previous quarter. The company released its three-quarter report in 2021, with revenue of 1.213 billion yuan (YOY29.73%), net profit of 170 million yuan (YOY 43.19%) and net profit of 163 million yuan (YOY 57.26%) in the first three quarters. Corresponding to 3Q21's revenue of 452 million yuan per quarter (YoY 36.14% QoQ 14.19%) and net profit of 62 million yuan (YoY 35.47% QoQ-3.95%), the revenue reached an all-time high in a single quarter. Affected by rising material costs and overseas epidemics, the profitability of 3Q21 decreased slightly compared with the previous year, with a single-quarter gross profit margin of 28.56%, an increase in 1.90pct compared with the same period last year, a decrease in 1.77pct, a net profit rate of 14.04%, an increase in 0.19pct over the same period last year, and a decrease in 2.45pct compared with the previous year.
In addition, the rate for the period is slightly higher than the same period last year.
Provide customized services in small batches, cooperate with customers for overseas capacity expansion, choose differentiated market strategy, serve customers in multiple industries, have more than 260customers, involving more than 5000 products and more than 60000 raw materials, and have established cooperative relations with Stanley Patek, Kangpu, Kohler, Chaochao, Shanghai Lianying, POLARIS and other customers to provide customers with small batch customized services. In order to meet the local delivery needs of core customers, the company has set up a subsidiary in Mexico and plans to invest in three SMT production lines, one of which has been completed. With the release of production capacity, the company's share of core customers is expected to continue to climb.
Focus on the pan-industrial field, benefit from "consumption upgrading and localization"
Unlike many large EMS companies focusing on consumer electronics, the company chose to dig deep into industrial control, medical electronics, automotive electronics and other pan-industrial sectors, accounting for 42%, 16% and 16% of revenue in 2020, respectively, and continue to maintain rapid growth this year. We believe that the localization of consumption upgrading will promote the expansion of the domestic industrial control, automobile and medical equipment market and accelerate the localization. As the forerunner of market segmentation, the company works closely with many international customers, and the proportion of overseas income has increased from 20% in 2016 to 44% in 2020. The accumulation of experience in working with international customers is expected to enable the company to effectively respond to the industry trend of "consumption upgrading and localization" and open up the space for revenue growth.
Investment advice: maintain a "buy" rating
We downgrade the company's 21-23 net profit to 245pm 350cm 476 million (previous value 2.53 pm 360pm 489 million), corresponding to a PE of 19.1 pm 13.4max 9.9x, maintaining a "buy" rating.
Risk hint: downstream demand is not as expected, capacity release and customer import progress is not as expected.
