Main points of investment
The acquisition expands the scope of business, and profitability continues to rise. The company's three main businesses are LED optoelectronic and green energy environmental protection, communications and smart home appliances, domestic and foreign trade supply chain business. Through the acquisition of Merry Optoelectronics, Yuanlei Technology and Zhongnuo Communication, the company has improved the business structure and industrial chain layout such as LED display, lighting packaging and mobile communications, and enhanced its profitability, with net profit growing by 49% in 2015 compared with the same period last year.
Mobile phone ODM business optimization structure, strong performance support. 1) by the end of 2015, there are about 920 million non-4G mobile phone users in China, more than double the number of 4G users. The huge demand for replacement of 4G smart phones will be the main driving force for the growth of China's mobile phone market. Domestic mobile phone ODM companies shipped 500 million units in 2015. Due to the high-quality strategy of mobile phone manufacturers and the concentration of shipments, the proportion of out-of-commission orders will continue to increase in the next 3 years, mobile phone ODM shipments will grow steadily and gradually concentrate to Top5's ODM company; at the same time, overseas markets will be a new business growth point of mobile phone ODM company. 2) Zhongnuo Telecom, acquired by the company, ranks fifth in shipments in the industry and is the main ODM partner of Huawei and Lenovo. Popular models include Huawei Changxiang 5 and so on. The net profit of SinoCom exceeded 100 million yuan in 2015, and the overall order increased by 50%. With the continued popularity of major customer Huawei mobile phone sales and the expansion of domestic well-known customers and overseas markets, Zhongnuo's profitability will continue to improve, with a high probability of completing the performance commitment of 120 million yuan in 2016.
The layout of the LED industrial chain has been further improved. The company has acquired Merry Optoelectronics and Yuanlei Technology to fill the gap in the field of LED display and lighting packaging. Through the acquisition, the company has the ability of LED display, lighting, packaging, engineering and other solutions, improving the layout of the LED industry chain.
The model of state-owned enterprise reform is expected to become the semiconductor industry platform of Fujian Electronic Information Group. The company is one of the only two listed company platforms of Fujian Electronic Information Group. Since listing, it has successfully achieved strategic transformation by means of resource integration, asset restructuring and structural adjustment. Fujian Electronic Information Group is a docking unit of Fujian and Taiwan LED, IC, LCD and communications industry determined by the Fujian Provincial Party Committee and Provincial Government, and a joint venture with Taiwan Union Power to build a 12-inch wafer factory in Xiamen; Fushun Microelectronics, a semiconductor company in which the company is a shareholder, has a 4-inch integrated circuit production capacity of 100,000 wafers per month and a 6-inch production line of 24,000 wafers per month. As a key enterprise in the field of integrated circuits, consumer electronics and LED, the company is expected to become an important platform for the group to develop the semiconductor industry.
Profit forecast and investment advice. Net profit is expected to maintain a compound growth rate of 23.4% over the next three years. The company's mobile phone ODM business has a certain degree of growth, and it is also a benchmark for the reform of state-owned enterprises. Coverage for the first time, giving a "overweight" rating.
Risk hints: the risk that SinoCom's market promotion may fall short of expectations; the risk that the reform of state-owned enterprises may fall short of expectations; and the risk that the performance of mergers and acquisitions may be less than promised.