The layout of mobile communication transmission cables throughout the industry, nine years ranked first in the RF coaxial industry. Founded in March 2007, the company initially mainly produced and sold a series of RF coaxial cable products, in which RF coaxial cable ranked first in the market with a share of 23.5% in 2010, and has occupied a leading position for nine consecutive years. In addition to consolidating its traditional advantages, the company expands its product range by constantly promoting flame retardant flexible cables to enter the operator market and 100% holding Junzhi optoelectronic layout optical cable industry. at present, it has formed the full production chain layout of mobile communication transmission, such as antenna feed system, optical network series, electronic components, accessories products and so on.
The customer base is solid, the R & D strength is outstanding, and the customer breadth of cooperation in 5G era is extended. At the beginning of its establishment, the company took the lead in seeking cooperation with the three major operators, accounting for more than 90% of the sales revenue. By 2018, it had provided more than 25% of the supporting products and transmission solutions for the three major operators. At the same time, actively expand business relations with ZTE Corporation, Huawei and other major equipment manufacturers and China Tower Corporation. We believe that 5G time is expected to benefit from the breadth of customer resources.
In the 5G era, the optoelectronic hybrid cable ushered in a broad space. The 5G base station RRU will be integrated with the antenna to form a 5G AAU active scheme. The optoelectronic hybrid cable is used to connect AAU and BBU, as well as to connect the micro base station and network equipment. China has achieved 5G commercial use, and the construction of 5G macro base stations and micro base stations will be carried out rapidly, leading to an increase in the demand for hybrid optoelectronic cables. The company is a 5G hybrid optoelectronic cable project in mid-2019, so we judge that with the rising market demand, the company is expected to open up cooperation space to provide a stable guarantee for follow-up orders.
The growth rate of sensor business is obvious, and the Internet of things. The 13th five-year Plan of the Internet of things in China calls for the scale of the Internet of things to exceed 1.5 trillion yuan in 2020, and the number of M2M connections in the public network to exceed 1.7 billion. Operators also promote the development of the industry through subsidies and comprehensive layout. The company achieved 100% holding of Junzhi Sensor in 2018, and in the first half of 2019, Junzhi Sensor's revenue was 67.2 million yuan, driving the plate business revenue to achieve 341.5% year-on-year growth. In the future, the company will also focus on the core technology and chip development of the Internet of things. We believe that the Internet of things industry will give the company a new development platform, and the company is expected to expand its market share through deep ploughing of the operator market.
Investment advice. We believe that hybrid optoelectronic cables and flame retardant flexible cables will benefit from the construction of 5G base stations to become a new driving force for performance growth, and traditional RF cables will also develop steadily under the demand for new 4G base stations and replacement of waste cables. with the rise of the market, the Internet of things business is expected to achieve a breakthrough. We expect the company's revenue in 19-21 to be 4.268 billion yuan, 5.537 billion yuan and 7.309 billion yuan, an increase of 23%, 30% and 32% over the same period last year, and the net profit of returning mother is 440 million yuan, 607 million yuan and 846 million yuan, an increase of 27.5%, 37.9% and 39.4% over the same period last year. The EPS for 19-21 years is 0.25,0.34 and 0.47 yuan. The corresponding closing price PE on January 10 was 6.3,4.6and 3.3x. With reference to the historical valuations of comparable companies and companies in Hong Kong, we give the company 8-9 times PE in 2019, corresponding to a reasonable value range of RMB1.97-2.21, equivalent to HK $2.21-HK $2.49. If the company enters the Hong Kong stock market in the future, we expect the company's valuation level to be closer to that of A-share comparable companies. For the first time, it is given a "better than the market" rating. (unless otherwise noted in this article, they are all denominated in RMB, HK $1 = RMB0.89)
Risk hint. The customer concentration is high, and the construction of 5G base station is not as expected.
