Key points of investment:
Second-quarter results recovered rapidly, and operating cash flow improved markedly
Recently, Power Source released its 2020 semi-annual report, showing that it achieved operating income of 5.2 billion yuan, an increase of 8.4% over the same period last year; net profit attributable to shareholders of listed companies was 5,936,600 yuan, an increase of 324.25% over the same period last year. The company's cash flow improved markedly, and operating cash flow increased 24% year over year. Despite being affected by the epidemic in the first half of the year, the company caught up with production progress in the second quarter, and overall revenue and net profit rebounded rapidly, which is expected to achieve the company's annual operating goals.
5G infrastructure has brought new opportunities. The company's various businesses have been growing steadily. Since this year, the company is committed to developing power products for the telecom industry, private network industry, data centers, etc., digging deep into existing key target markets and industry customer needs, developing and producing power products that meet customer needs, striving to provide customers with comprehensive power product solutions, continuously increasing the market share of existing key industry segments. The company's power supply business is being further expanded.
As an important part of new infrastructure, 5G will usher in a period of rapid development. The next few years will be the main investment period for 5G networks, and capital expenditure is expected to exceed 770 billion yuan. The large-scale construction of 5G base stations will spawn incremental demand for communication power supplies, and the company's communication power products will enter a period of rapid deployment. At the same time, IDC is another long-term mainline in the communications industry. It is estimated that in 2022, the scale of data centers will reach 320 billion yuan, of which the scale of power supplies will exceed 10 billion. The company has positioned data centers as an important development direction, increasing investment in domestic and foreign data center business, and laying the foundation for subsequent growth.
The company's backup power products are widely used in various scenarios, and it continues to maintain a leading position in domestic markets such as rail transit and petrochemical industries. Furthermore, the company's power optimizer products have been successively applied in domestic and foreign communication base stations to provide power and charge management functions to improve system efficiency. In the field of new energy vehicles, the company has concentrated its superior resources to develop products related to core components in the automotive field, and has formed core technical advantages in electric drive systems, vehicle power supplies, hydrogen fuel cell DC/DC converters, and charging piles. Under the long-term positive basic trend of the NEV industry, the company's hydrogen power products, vehicle power supplies and drive system products will continue to drive business growth. Furthermore, the State Grid has stepped up the construction of charging pile facilities. It is estimated that 78,000 new charging piles will be added this year. The company's various charging piles are expected to take advantage of the surge in demand for charging equipment and achieve a good breakthrough.
Continuously increase investment in R&D and continuously improve the company's internal competitiveness By mastering the key core technologies of power supply products, the company has formed sustainable development advantages in terms of technology platforms, product development and R&D teams. It has developed a full topology, a technology platform covering the full power range, and more than 100 kinds of products, which are widely used in the three fields of data communication, smart energy and new energy vehicles. As of June 30, the company had a total of 309 active intellectual property rights, including 61 invention patents, 156 utility models, 32 design patents, 42 software copyrights, and 18 registered trademarks.
As an enterprise mainly based on independent research and development, the company has established a pilot and experimental verification system based on IPD management, and has built a series of reliability verification laboratories to continuously meet the speed of the company's product development and the higher requirements for product quality in global sales. The company's supply chain management system is driven by customer demand to achieve end-to-end industrial chain collaboration at the lowest comprehensive cost, enhancing the company's overall competitiveness. The company fully automatically upgraded the manufacturing system to form an “intelligent manufacturing factory” to improve manufacturing efficiency and reduce manufacturing costs.
Active measures have been taken to eliminate the short-term impact. Steady growth in mid-term performance is guaranteed to be affected by the epidemic. The company's overall revenue and net profit declined in the first quarter. However, with the country's vigorous development of new infrastructure, the operator's 5G equipment bidding and full launch of infrastructure, the company responded positively to market changes, persisted in innovation-driven development, and launched power products that meet the needs of industry customers; integrated internal resources, promoted internal management changes, and continued to focus on power conversion and energy utilization in the fields of data communication, smart energy and new energy vehicles, and the company's performance achieved steady growth. Currently, the company has sufficient orders on hand, such as China Tower's 203 million yuan power supply procurement contract, China Unicom's 86 million yuan switching power supply procurement contract, and has successively won bids for Tencent and Baidu IDC power supply projects and successfully completed supply and delivery. In addition, companies in the subway, photovoltaic and other industries won bids for corresponding power projects. The NEV sector continues to cooperate with first-tier companies in various fields at home and abroad, adding to the original 60 customers, New Growth City Auto, Liuzhou Wuling, Guangdong Guohong and other customers. This has greatly increased the brand influence and market share of the company's products in the industry.
Profit forecasting
Considering the current acceleration of 5G construction, demand for communication power will be rapidly released. The driving effect of the company's power supply business on the company's business will increase significantly. The second quarter turned a loss into a profit, revenue and profit increased significantly in the single quarter, and the company's performance has returned to an upward trend. We are optimistic about the company's current transformation plan and development momentum for the next two years. At the same time, considering the impact of this year's epidemic, the company's revenue for the next three years is estimated to be 1,394 million yuan, 1,672 million yuan, and 2,007 billion yuan. The corresponding net profit for the next three years is 81.86 million yuan, 1.24 billion yuan and 107.6 billion yuan, continuing Give the company an “increase in holdings” rating.
Risk warning: Carrier collection orders fell short of expectations, and the development of the NEV business fell short of expectations.