Summary of the report
Company overview
The company is a custom wire assembly supplier headquartered in Hong Kong and has production facilities in Huizhou, Guangdong Province, China. The company produces a wide variety of wire assembly products, according to its different transmission media can be divided into copper wire assembly and optical fiber wire assembly, the products are used in telecommunications, data centers, industrial and medical equipment and other fields.
According to the report of Yuanzhe Consulting, the company ranked second in the Chinese market of producing wire components for communications equipment and data centers in 2016 in terms of sales revenue and accounted for about 0.2% of the Chinese wire assembly market in 2016.
In the fiscal year 2015-2017, the company's revenue was HK $941 million, HK $912 million and HK $865 million, respectively, and its net profit was HK $66.7 million, HK $71.6 million and HK $81.7 million, respectively. In fiscal year 2017, the company's revenue in the four market segments of communications, data center, industrial equipment and medical equipment was 56.3%, 32.2%, 7.1% and 4.4% respectively, and the product gross profit margin was 4.9%, 38.4%, 19.7% and 35.6%, respectively. The company's consolidated gross profit margin is 18.1%.
Industry status and prospects
According to the report of Yuan Zhe Consulting, the market size of wire components in China in 2016 is about 402.9 billion yuan, and the CAGR in the past four years is 8.5%. The growth is mainly driven by telecommunications equipment and data centers, industrial and medical equipment, mobile phones and other markets. China's wire assembly market is expected to continue to grow from 2017 to 2021.
The market size of China's telecommunications equipment and data center wire components has increased from 17.1 billion yuan in 2012 to 28.6 billion yuan in 2016, with a CAGR of 13.7 percent, and the market size is expected to increase to 64.5 billion yuan at a compound annual growth rate of 17.7 percent during the forecast period from 2017 to 2021.
Advantages and opportunities
Highly adaptable to the B2B model and customer-oriented wire component suppliers, and able to meet enterprise customers
Adopt effective customization and flexible production mode to meet the needs of different customers
Forward-looking senior management, experienced executive team and outstanding executive ability.
Weakness and risk
Customer concentration
Labor costs continue to rise
The supply and price of raw materials fluctuate greatly.
Valuation
Assuming a 10 per cent net profit growth forecast, the company's net profit for fiscal 2018 would be about HK $90.3m. According to the IPO pricing, the company's 2018 pro forma forecast price-to-earnings ratio is 5.1-10.2 times, while the corresponding city-to-net ratio range is 1.67-2.63 times, the valuation is relatively reasonable. Taking it into consideration, Huiji Technology is given a special IPO rating of "5".