Company newsletter
We attended the Hong Kong Autumn Electronics Show held at the Hong Kong Convention and Exhibition Centre on October 14.
Tianbao is one of the larger exhibitors in the venue, setting up a 3roomx10' booth to display its own brand chargers and a VIP room to display a variety of products it makes for its main customers.
There are many styles of new products.
New products that we pay particular attention to include: I) electric bicycle chargers for Bosch (Bosch develops battery systems for many high-performance electric bicycle brands); ii) electric car chargers for a Shandong customer; iii) intelligent controllers for TTI and SWK; iv) QualcommQuick Charge 3.0 compatible chargers; v) chargers for Google Home and Chromecast; and vi) car incense fumigators and chargers. Pictures of the above products are shown on pages 2-3.
We believe that these products may not contribute a large amount of revenue in the short term, but they do have long-term growth potential, such as mountain bikes and urban bikes becoming more and more popular in Europe in recent years. In addition, it also reflects that Tianbao has begun to supply products other than Bosch power tools, which has a positive effect on the development of Tianbao.
Qualcomm's business has also expanded from smartphones to other new electronic devices, and its fast charging (Quick Charge) technology is a long-term growth driver. The average price of Qualcomm fast charging products should be similar to Oppo's Flash Charge, which is about 30 yuan, compared with 8-10 yuan for traditional chargers.
It is currently the main supplier of Oppo flash charge.
We learned at the exhibition that Tianbao is currently the main supplier of Oppo flash charge adapters (supply more than 50%). We note that the failure of Samsung Galaxy Note 7 may benefit shipments of other large smartphone brands, including Oppo, indirectly benefiting Tianbao. In addition, the overall number of visitors who have benefited from this year's exhibition has increased. As of the day of our visit (the second day of the exhibition), the number of visitors to the Tianbao booth has increased by 20-30% compared with last year. We have also observed that many general power suppliers also participated in the exhibition, although they may become smaller competitors, however, at present, Tianbao offers advanced charging solutions (such as wireless charging, fast charging), control functions (intelligent controllers for power tools) and more attractive product designs, which are not available yet. This once again confirms our view that although competitors' products are getting cheaper, Tianbao's average product price and gross profit margin can still maintain a steady upward momentum.
Re-buy
We continue to be bullish on Tianbao, keeping the buying, forecast and target price unchanged (the target price is HK $1.86 based on 8 times forecast earnings for FY17). Although the share price has risen sharply in the past three months, the current price-to-earnings ratio is only 6 times, coupled with the dividend yield of 5%, we think the stock price will continue to rise.
