I. Overview of events
Recently, Alto Electronics released its mid-2020s report: revenue was 366 million yuan, down 26.6% from the same period last year; net profit from home was 11 million yuan, down 83.9% from the same period last year; net profit after deducting non-return was-7 million yuan, down 111.1% from the same period last year; basic EPS was 0.02 yuan, down 83.3% from the same period last year.
II. Analysis and judgment
The performance improved significantly in the second quarter, and the profitability increased month-on-month.
The revenue of Q2 was 228 million yuan, up 5.4% from the same period last year, 65.2% from the previous month and 5.4% from the same period last year; the gross profit was 38.1%, and the net profit of Q2 was 19.72 million yuan compared with the previous month. Q2 performance improvement mainly benefits from: (1) continuous expansion of the domestic market, orders gradually return to normal; (2) adjustment of business strategy, improvement of management efficiency; (3) comprehensive promotion of resumption of production and gradual recovery of production. We believe that with the adjustment of business strategy and the gradual release of orders on hand, the company is expected to gradually come out of the trough, and the performance is expected to continue to improve in the second half of the year.
The epidemic affects LED application business in the short term. In the second half of the year, it is expected to see a turnaround in the first half of the year. The revenue of LED application business in the first half of the year is 226 million yuan, down 37.60% from the same period last year, and the gross profit margin is 34.25%, year-on-year-9.94pct. Due to the epidemic and other factors, the delivery of overseas orders of the company is delayed, the construction and business development of domestic LED projects are greatly affected, and the normal acceptance and repayment of the project are delayed accordingly. At present, the company actively develops domestic LED display business and relies on Mini LED first-mover advantage, gradually developing LED market segments such as conference rooms, and has completed a number of projects, including China China Construction Bank Corporation Shanghai Kechuang Financial Core Lab, Switzerland, China Merchants Bank Shenzhen Branch, and Shenzhen Bay Laboratory of Peking University Shenzhen Graduate School, etc. In the field of intelligent lighting, the company continues to select high-quality projects and select projects with better local finances. in the first half of the year, it undertook a number of high-quality projects such as the landscape lighting promotion project of Nanhai Financial District of Foshan City and the first phase of Shenzhen Baoan Binhai Culture Park. We believe that the company has sufficient technology reserves in the field of LED application business, and Mini LED business has a first-mover advantage. With the resumption of overseas economy and orders returning to normal, LED business is expected to get back on track in the second half of the year.
The layout of financial technology business has been continuously optimized, and revenue has gone against the trend. Financial technology business revenue has reached 139 million yuan, an increase of 2.69% over the same period last year, with a gross profit margin of 42.3% and-3.18 pct compared with the same period last year. A number of smart bank network projects and China Telecom Corporation and China Mobile Limited wisdom business hall renovation projects have helped the company's performance to reverse the trend. During the reporting period, the company implemented a number of unique smart bank network projects, including China Construction Bank Corporation Jiaxing Housing Finance Center and China Construction Bank Corporation Xi'an Housing Finance Center, etc., and also became a candidate for China Mobile Limited DICT National Integrated Bank partner (the second batch) smart bank project and supplier of China Unicom 5G Innovation Application Zone.
We believe that the company, which has been engaged in financial technology for more than 20 years, has the advantages of large customers, wide coverage of services and outlets, and excellent solutions, and will continue to benefit as the penetration rate of smart network transformation of banks and operators increases.
III. Investment suggestions
It is estimated that the net profit of the company from 2020 to 2022 is 179 million yuan, 238 million yuan and 299 million yuan respectively, and the corresponding PE is 21X/16X/13X. With reference to the average PE valuation of the SW electronics manufacturing industry at 41 times (TTM, holistic approach), maintain the "recommended" rating.
Fourth, risk tips:
(1) the recovery of overseas demand is not as expected; (2) the competition in the industry is intensified; (3) the promotion of financial technology is not as expected; (4) the penetration rate of MiniLED is not as expected.