1. The old Internet of things industry has seen a high increase in revenue. We look forward to a deep ploughing and multi-vertical coverage in the field of Internet of things communications at the inflection point. Fang Technology was founded in October 2006 and listed in 2020. The company's main business is the research and development, production and sales of Internet of things wireless communication module, Internet of things wireless communication terminal and Internet of things wireless communication solution. The products cover many vertical areas such as smart energy, vehicle Internet and so on.
In 2020, the company's overall operating income was 574 million yuan, down 26.66% from the same period last year, mainly due to the epidemic, the reduced demand for overseas vehicle networking terminals and domestic power grid products, and the delivery of orders in hand in the fourth quarter was affected by a shortage of chips. In the first three quarters of 21, the company's operating income returned to the growth track, achieving operating income of 685 million yuan, an increase of 58.52% over the same period last year. In terms of net profit, the company achieved a net profit of-75.06 million yuan in 2020, a sharp drop of 237.58% compared with the same period last year, mainly due to the decline in revenue and increased investment in R & D and sales. In the first three quarters of 21 years, the company's net profit increased compared with the same period last year, but there was still a small loss (- 10.31 million yuan). The company announced its 2021 results, KuaiBao, with an estimated annual income of 1.029 billion yuan, an increase of 79.33% over the same period last year, and a net profit of-5 million yuan. The overall performance shows a trend of rapid development and profitability repair. We believe that with the improvement of the epidemic situation and the optimization of the company's product structure, the company's management will gradually improve and future development can be expected.
2. The application space of the Internet of things is broad, and the prosperity of the industry leads to the demand for communication modules. The market scale of the Internet of things exceeds one trillion yuan, and there is still a broad market space in the future. At present, the market size of the Internet of things in China has exceeded 2 trillion yuan, with a year-on-year growth rate of more than 20%. At the same time, IDC expects the global market size of the Internet of things to reach US $1.1 trillion in 2025, with broad space for the industry. Specifically:
① vehicle networking market. From the perspective of market scale, according to the forecast of IHS, there will be 350 million connected vehicles worldwide in 2022, and the penetration rate of 24% is still low. With the continuous penetration of intelligent driving / vehicle networking, the demand for in-vehicle communication modules is expected to be released quickly in the future. According to our estimates, the market size of vehicle modules is expected to grow from 7.9 billion yuan in 2020 to 23.6 billion yuan in 2025, with a compound growth rate of 24.5%.
② charging pile market. The rapid growth of sales of new energy vehicles has led to the acceleration of charging pile construction in various places, and the number of high-speed service areas, public transportation and public charging piles will be estimated. About 1.53 million new piles will be built in 2025 compared with the current construction. The charging pile is equipped with communication module, and Cat.1/LTE module can be selected for data transmission.
③ smart grid. China's smart grid construction has entered a period of new energy transformation, the State Grid / Southern Power Grid have issued plans for digital, intelligent construction, communication modules enable meter reading and distribution network monitoring, the demand is expected to increase.
④ photovoltaic inverter. The installed scale of photovoltaic in China is growing again, and the installed 48.2GW will be added in 2020, an increase of 60% over the same period last year. At the same time, the new / replacement market of photovoltaic inverter is developing rapidly, and the inverter is equipped with communication module to drive the demand.
⑤ notebook market. Notebook modules will benefit from the increase in permeability to quickly open up the market space, with the permeability increased to 20% in 2025, and the market size of laptop cellular communication modules will reach 5.582 billion yuan by 2025.
3. Technology + channel + customer + price advantage helps the company to seize the new opportunities under the tide of the times. first of all, technologically, the company continues to increase its R & D. in 2020, the company's R & D investment accounted for 15.24% of business income, leading its peers. In addition, the company has a number of projects under research to ensure the continuous maintenance of strong technological competitiveness. At the same time, due to the continuous investment in research and development, the company's products have a certain first-mover advantage to help market development.
Secondly, the company actively laid out the global marketing network on the channel, established a marketing network covering Europe, America, India and Southeast Asian markets, and enabled the company's product sales to grow. Among them, the sales of wireless communication modules grew at a compound growth rate of 30.09% from 2016 to 2020, and wireless communication solutions have shown rapid growth in the past two years due to a small base.
Thirdly, customers have accumulated strong brand influence with more than ten years of deep cultivation in the company's industry, and have leading corporate customers in many vertical fields, including national / southern power grid in the field of electric power, Guangzhou Automobile and Dongfeng in the field of vehicle networking.
Finally, compared with overseas competitors, the company has a price advantage, which is beneficial for the company to maintain and develop overseas market share. At the same time, the company actively controls the comprehensive cost, and the purchasing cost of single product is significantly reduced to ensure the profitability of the company.
We believe that the company's strong competitive advantage in the four dimensions will enable the company to seize the industry opportunities in the era of the Internet of things, help the company's performance continue to grow, and become one of the leaders in the field of Internet of things communications.
Profit forecast and investment advice: the company is one of the leaders in the Internet of things module industry, and will fully benefit from the development of the industry and the growth of downstream application demand in the next few years. The company takes the smart grid as the basic business and continues to expand the high-prosperity racetrack. At the same time, the company expands cloud-management-end products, enriches products and services, and is expected to improve profitability. From 2021 to 2023, we estimate that the operating income of the company will be 1.602 billion yuan, and the net profit of the company will be-0.05 billion yuan. With reference to the valuation of comparable companies in the same industry, it is based on 35 times PE in 22 years, corresponding to the target price of 34.42 yuan. Coverage for the first time, giving a "overweight" rating.
Risk tips: the risk of continuous high prices of upstream raw materials, the risk of prolonged delivery due to shortage of upstream chips, the lower-than-expected research and development of new technologies, fierce market competition, declining profitability and other risks.
