Main points of investment:
With the core competitiveness of precision instrument manufacturers, the main business income and profits to achieve double growth. The company is a leading supplier of precision components in China, focusing on automotive electronic precision connectors and their components, mobile phone precision shielding and connector components, accounting for more than 90% of all revenue sources of the company. The company achieved steady growth in revenue and profits, with operating income reaching 340.1973 million yuan in 2016, an increase of 7.85% over the same period last year, and net profit of 49.5435 million yuan, an increase of 26.7% over the same period last year. Automotive electronics business achieved rapid growth, and the mobile phone market further refined its products.
The scale of the domestic automotive electronics market continues to increase, and precision connectors promote the rapid development of the company's automotive business.
With the rapid development of domestic automobile industry market and manufacturing, it has become the largest automobile producer in the world, which brings great opportunities to domestic automotive electronics suppliers. According to HIS, China's mobile phone and automobile connector and shield market reached 38.078 billion yuan in 2015 and is expected to reach 50.091 billion yuan in 2020. The industry market and development prospects are good. The company's precision connectors in the field of automotive electronics have also achieved steady growth, with related revenue growing from 95.98 million yuan in 2014 to 181.92 million yuan in 2016, with a compound annual growth rate of 36.67 percent. It is expected that the development momentum of the business can still be maintained in the future.
The R & D and production of mobile phone precision shielding cover and its precision connectors open a rising channel in the mobile phone market. The company's research and development in the field of mobile phones has been quite effective. At present, it has successfully developed more than 200 types of precision mobile phone connectors and shields, and obtained 12 domestic advanced technologies and dozens of national patents. The growth rate of the domestic mobile phone market has slowed down after the explosive growth after 2011, but the competitive focus of smartphones tends to be powerful and beautiful appearance, and complex internal chips provide stable development opportunities for precision connectors and shields. combined with the company's technological advantages in mobile phone-related components, growth is expected in the future.
Technical advantages and customer resources to create excellent parts suppliers in the downstream market. The company takes the lead in the technology and scale in the related fields of automobile and mobile phone market segmentation, precision connectors and shields have a strong R & D and production team, mature product design and process, stable and high quality customer resources, and has entered the industrial chain of many leading companies. On the other hand, the domestic downstream market has broad development prospects, and the upgrading speed of related products is fast, which will bring strong demand for spare parts. At the same time, the application fields of the company's main products are also wide, and its market share and development scale can be guaranteed.
Profit forecast. We forecast that the company's operating income from 2017 to 2019 is 4.31,6.37 and 872 million yuan respectively, and the net profit is 0.68,1.31 and 166 million yuan respectively, corresponding to EPS 0.56,1.09,1.38 yuan. Combined with the comparable company's PE average valuation of 42 times in 18 years, corresponding to the target price of 45.78 yuan, the company is given a "buy" rating.
Risk hint. The customer asks for the pressure of price reduction.