732.HK Xinli International Co., Ltd. is an investment holding company mainly engaged in the manufacture and sales of liquid crystal display products, and was listed on the Hong Kong Stock Exchange in July 1991. According to the business, the company's business can be divided into two major business divisions: one is the liquid crystal display product division, which mainly includes display panel production and processing, and the downstream is the supply of parts related to the company's display module and external supply; the other is the electronic consumer products division, which mainly includes consumer electronics / medical / industrial control / vehicle and other directions such as touch module, camera module and display module.
Summary of the report
The established vehicle supply chain multiplied by Dongfeng started as a panel LCD business and became the seventh industry leader in TFT panel supply in the world as early as 2015. Customers are mainly overseas tier1 suppliers and domestic emerging automobile forces.
With the increase of sales volume driven by automobile intelligence and electrification, and the value-added demand of large screen and other high-end vehicle projects to drive the unit price and gross profit margin of products, vehicle orders are expected to become an important support for the company's performance growth. Compared with the 10% gross margin of the smartphone-related business, the 15-20% gross margin of the car business gives the related business a lot of room to improve its profitability.
The proportion of large-size products in the opening project of on-board TFT, touch screen and cover plate products is increasing rapidly year by year, and the demand for optical surface treatment of vehicle touch screen and cover plate glass is increasing year by year, which increases the added value of vehicle display and touch products. For example, the unit price of products treated with AG treatment is increased by about 15%, and that of products treated by AR is increased by about 18%. The unit price of products processed by AF is increased by about 4%.
The upstream panel production capacity enhancement deepening upstream and downstream integration advantage company has four mid-generation panel production plants, which supply panel raw materials for the lower reaches of the company, solving the problem of finding customer sources, and opening up the upstream and downstream supply chain, which can not only ensure the stability of the supply chain, and take this advantage to negotiate orders with customers, but also ensure the improvement of profit margins.
In 2022, the production of Shanwei 5th generation TFT and Renshou 5th generation TMT will be expanded from 45K and 55k to 60k and 100k respectively, so as to meet the growing downstream demand.
The buyback of external shares shows confidence that the company gradually recovered its external shares after Xinli Optoelectronics stopped its spin-off and listing. After the most recent repurchase on September 29, 2021, the company held Xinli Optoelectronics to 96.5% of Sinopec's shares in Huizhou to 76% on November 29. The company's repurchase of external shares in its subsidiaries shows its confidence in the subsequent growth of its own performance.
The "buy" rating is covered for the first time, with a target price of HK $4.55. although the development of the smartphone business has entered a bottleneck period, however, the rapid growth in demand in the car business and the supplement of industrial control, medical, wear and other businesses can drive the growth of the company's revenue. We expect the company's revenue to grow by 1.6%, 12.0% and 12.8% to 22.5 billion, 25.2 billion and 28.5 billion HK dollars respectively in 2023. The increase in the proportion of in-car products is expected to lead to an increase in the company's gross profit margin. We estimate that the company's net profit in 2021, 2022, 2023 will increase by 131.4%, 16.1%, 26.4% respectively over the same period last year. As an established supplier of automotive electronics, the company ushered in a new industry outbreak after the dividend of the consumer electronics industry gradually faded. We gave the company a target price of HK $4.55, an increase of 41.3% from its recent closing price, based on the company's estimated price-to-earnings ratio of 11.6 pound in 2022, covering the "buy" rating for the first time.
Risk tips: the impact of the growth rate of shipments; the impact of the epidemic aggravates the impact on demand; the risk of short-term market fluctuations.