Main points of investment:
Star Technology, founded in 2003, was once the forefront window cover glass manufacturer in the industry. In the past two years, through mergers and acquisitions in the capital market, the industrial chain has been extended to the whole industry chain of smart phones. at present, the business includes the R & D and manufacture of various window protection screens, touch display modules and precision structures. the products are mainly used in mobile phones, tablet computers and other consumer electronic products, but also widely used in vehicle electronics, virtual reality, medical devices and other fields.
1. The dependence on the simplification of cover glass business is gradually eliminated.
The company's traditional main business is mobile phone cover glass manufacturing, used to be the forefront of window cover glass manufacturing enterprises in the industry, but due to the past business line and customer structure is relatively single, performance is greatly affected by customer sales. In the past few years, with the gradual decline of Nokia and other important customers, there has been a considerable decline in performance. The company's full-year operating profit in 2012 fell by 108.71% compared with the same period last year, and its operating profit in 2013 dropped by 2762.34% compared with the same period last year. Shenyue Optoelectronics completed the acquisition in 2014, and gradually adjusted the customer structure to gradually turn losses into profits.
In terms of cost, in recent years, the automation upgrading speed of the cover glass industry is very fast, screen printing, CNC processing, handling superposition and other processes have the introduction of fully automated equipment, glass cover processing of this industry has greatly reduced the level of manpower demand. At present, the growth of smart phones has entered the stock market stage, and mobile phone cover products lack of differentiation, the major manufacturers through the price war to seize market share. Although the company is also working hard to innovate the equipment and technology, the price of consumer terminal products has declined even faster under the realistic background of cruel price competition in the Red Sea in recent years. In 2015, the gross profit margin of the company's mobile phone cover business was 9.70%, down 9.86% from the same period last year. Under the dual pressure of the reduction of major customer orders and the rapid decline in market product prices, the performance of the company's main business cover glass has declined significantly.
The de-simplification of cover glass in the main business is the top priority of the company's business structure adjustment in recent years. The company's 2015 revenue of cover glass was 340 million yuan, down about 15% from 2014, and the proportion of annual revenue dropped from 26% in 2014 to 8.8%. The adjustment effect is very obvious.
two。 Use the configuration of the whole industry chain to deal with the problem of single customer and single industry.
At present, the concentration of brands and contract manufacturers in the consumer electronics industry is getting higher and higher, the industry resources are constantly integrated, and the competition is becoming increasingly fierce, which means that enterprises with product positioning of a single customer or a single industry will bear greater risks and it is difficult to gain a foothold in the industry. In the past two years, through the integration of internal resources and the horizontal merger and reorganization of a series of industries, the company has got rid of the past mode of increasing the volume of a single product and made a comprehensive layout to the integrated full product chain.
In 2013, the company established Star Valley Touch, acquired Shenyue Optoelectronics to enter the touch display industry, and gradually strengthened the supply capacity of full-laminated products. Full-laminated screen sales increased significantly in 2015, and supplied large quantities of Huawei, Asustek, HTC and other end customers. In 2014, Lianmao Plastics was acquired and its business expanded into the field of precision structural components, and then through the acquisition of Ruiding Manufacturing, Lianmao improved and expanded the metal CNC process technology and large-scale production capacity, and further improved the product structure to complete the whole industry chain of metal and plastic parts; in the first half of 2015, the company invested in the fingerprint identification module production line, which has been set up and initially supplied in small quantities.
The company provides customers with one-stop product supply and services, make full use of market synergy to enhance the overall competitive advantage, strengthen the ability of cooperation with customers, and increase customers' stickiness to the company's products, so as to enhance the competitiveness of the company. Judging from the increasing performance pressure of leading enterprises in the cover plate industry, such as Lance and Bourne, there are certain risks in the development model of a single industry when the development of intelligent terminals slows down. diversified business structure helps the company to meet the diversified needs of the market while enhancing the ability to resist risks, we are optimistic about the development idea of the configuration of the whole industry chain.
3. Lianmao multi-tier customer structure adjustment has been completed, faster-than-expected growth arrow has been in the string.
The company acquired Shenzhen Lianmao in 2015 and expanded its business to the field of precision structural components. Lianmao realized a net profit of 119.023 million yuan attributable to the parent company after deducting non-recurring profits and losses in 2015, which was 30.977 million yuan less than the promised performance at the time of acquisition, with a completion rate of 79.35%. The main reason for the failure to complete the performance is the adjustment of customer structure and the layout of customer products last year. Before 2014, the company's customers were mainly Coolpad and Lenovo, and after 2015, it gradually introduced heavyweight customers such as Huawei, Asustek, ZTE and HTC (in addition to smart terminals, the company also provides plastic structures for HTC VIVE). Mass production of new customers and new projects only began to scale up gradually in the third quarter of 2015, contributing too late to the 2015 output value, making this part of the expected profit not realized as expected.
We believe that after Lianmao has completed the adjustment of multi-level customer structure and the increase in the proportion of production automation in the past two years, the advantage of scale will be centrally reflected in 2016, and the situation of substandard performance will not be repeated in 2016. The use of Lianmao's high-quality customer resources can form a good supplement and extension to the company's existing business, and there will be a good chemical reaction between the overall layout of plastic metal and the promotion of the company's whole industry chain. With the listing of HTC VIVE this year and the mass production of new customers, the company's performance is expected to achieve higher-than-expected growth.
4. The follow-up development of 3D glass cover, fingerprint recognition module and VR related components is worth looking forward to.
While actively carrying out the extension of the industrial chain, the company also continues to increase the exploration and research and development of new products and new technologies, enhance the company's R & D and manufacturing capabilities, and lay out emerging markets, such as virtual reality products, fingerprint identification, wearability and other fields.
As the Amoled panel has once again become the focus of panel applications in the market, the combination of bendable screen and 3D curved cover is likely to become a new hot spot for smart terminal appearance applications in 2016. At present, the company's 3D cover glass technology occupies a leading position in the domestic industry, and the company has sufficient technical reserves in 3D cover forming, curved surface printing, curved surface fitting and other processes. It is expected to become a new performance growth point of the company.
In the first half of last year, the company invested in the fingerprint recognition module production line and achieved small-scale mass production, mainly customers of the original touch screen and Lianmao. The company's finger recognition module has its own unique advantages, cooperation with domestic fingerprint recognition module manufacturers, the use of bright coating technology, relative to the Matt visual effect is better. In the future, with the gradual popularization of mobile phone fingerprint recognition module configuration, the performance growth and customer recognition in this area will gradually rise.
Lianmao's precision structural components are widely used in consumer electronic products such as smartphones, tablets and smart hardware. In the past two years, all kinds of VR devices have sprung up, especially the influx of a large number of Internet companies, which has led to the rapid growth of contract manufacturing demand for VR terminals. Due to the comfortable and lightweight requirements of VR headwear, its appearance parts and structural parts often choose lightweight plastic process. With its excellent process technology, Lianmao has become a supplier of exterior structural parts for HTC VIVE. It is believed that after completing the "five + five" customer structure optimization in the past two years, the company will have more development opportunities in the field of VR.
5. The impact of Wintek bankruptcy restructuring is fading.
The company's 2015 performance was greatly affected by Taiwan's Wintek bankruptcy reorganization, with more than 60 million of the impact of one-time provision, provision for decline in inventory prices and bad debt treatment of receivables. At present, the remaining assets of Wintek bankruptcy restructuring are likely to have a new disposal plan by the end of the year, and a small portion of the outstanding accounts of the company are expected to be compensated. But even if this part cannot be paid, the impact on the company's performance in 2016 has faded, and the negative impact of Wintek will gradually dissipate.
6. Give Star Technology a buy rating.
At present, the pursuit of electronic consumer goods is the overall quantity and share, rather than the simple expansion of a single product. Electronic consumption is a capital-intensive, labor-intensive and technology-intensive industry. We have seen the company's management in the past two years to improve efficiency, strengthen automation, reduce labor and other aspects of continuous efforts. In the three years from 2012 to 2014, Star Group has gradually found the direction of using the whole industry chain configuration to deal with the problem of single customer and single industry. at the same time, we also believe that the company will adopt a more diversified development layout in the future to realize steady growth. We estimate that the company's profit from 2016 to 2018 will be about 252 million, 311 million, 390 million, and the corresponding EPS for 16-18 years will be 0.39,0.48,0.60 yuan respectively. The company's current stock price will be valued at 31.1,25.2 times for this year's and next year's EPS. The company's industrial chain layout is forward-looking and its future growth is promising.
Risk tips: 1. Affected by the intensification of competition in the industry, the performance of Shenzhen Lianmao and Shenyue Optoelectronics fell short of the promised expectations again.
two。 The sales data of fingerprint recognition module are not up to expectations.
3. The overall growth rate of the smartphone industry has slowed, and the decline in customer sentiment has led to a decline in the company's overall shipments.