Event: the company announced on the 23rd that it intends to buy an 11% stake in Fukosima with its own capital of 11 million yuan. Before this acquisition, the company already held a 40% stake in Fukosima. After the completion of the acquisition, the company will eventually hold a 51% stake in Fukosima, which will become a controlling subsidiary of the company. Our comments are as follows:
It is proposed to acquire 11% of the shareholding company Fuke Sima, which will become a controlling subsidiary of the company. Fuke Sima is a high-tech enterprise specializing in the technical development and application of MPO/MT plugs and connectors. It has become a supplier of MPO products to Huawei, Hisense Optoelectronics and other enterprises, with a business income of 55.4241 million yuan and a net profit of 9.6355 million yuan in 2022. In order to further enhance the service capability in the field of optical communication products, actively seize the development opportunities of the optical communication market, and further enhance the competitiveness and profitability of the company, the company plans to use its own capital of 11 million yuan to buy 11% of Fuke Sima held by Xuan Guodong. Before this acquisition, the company already held a 40% stake in Fukosima. After the completion of the acquisition, the company will eventually hold a 51% stake in Fukosima, which will become a controlling subsidiary of the company.
Holding Fuke Sima strengthens the synergy, and the optical communication business will open a new growth curve. Since 2019, the company has begun to provide optical communications related product solutions, and joined Fukosima in 2020 and established a joint venture with SENKO in 2022. The company's optical communication products include single-core and multi-core MPO optical fiber jumpers, application scenarios include data center, 5G construction, etc., customers cover SENKO, special messages and other well-known enterprises. After the completion of this acquisition, we believe that Fukosima, as the leading MPO/MT plug manufacturer in China, its leading plug product capability will further form a coordinated package with the company's existing optical communication products. At the same time, the Vietnamese company, a joint venture between the company and SENKO, is mainly engaged in optical fiber connector business, which is expected to bring considerable growth flexibility. Under the AI tide, the demand for downstream computing power increases. With the expansion of new production capacity and category expansion, the company is expected to fully benefit from the development dividends of optical fiber connectors such as MPO, and optical communication business will become an important growth point in the future.
Game console and XR field deep ploughing N company and card Meta/ Sony Group Corp and other head manufacturers, share increase, category expansion space is expected. N company Switch for the fastest sales of 100 million units of the game console, the company began to supply Switch slides in 2018, and gradually introduce game console connectors, touch switches, card slots and so on.
Benefiting from the high sales of Switch and the increased share of slide rail products in new models, the company's game console parts business is growing rapidly, and the gross profit margin of slide rail products is higher because of high technical barriers. Although sales of the short-term Switch declined in the seventh year of its life cycle, the next generation of products are in the stage of research and development and are expected to bring new momentum in the future. Zhishang is a rare parts supply chain of N Company in China, and its share will be increased in the future, and the category expansion space can still be expected. Among them, the company is in the lead in precision positioning controller technology, with more than 2000 service life and significantly improving the product drift problem. It is expected to be used in Switch in the future. In addition, the company's card position Meta, Sony Group Corp, Pico and other head manufacturers, providing accurate positioning controllers, game console connectors, etc., are expected to further benefit with the launch of Quest3 and the growth of PS5 sales.
Investment advice: give a "highly recommended" investment rating for the first time. The company is one of the few domestic manufacturers specializing in the production of game machine parts, and the layout of optical fiber, electronic connectors for many years, while expanding the business of automation equipment. With the gradual improvement of downstream demand and the continuous improvement of the company's product categories and shares, fund-raising projects will further expand the company's production capacity and is expected to open up a new growth space for the company in the future. Based on the financial cost savings brought about by Fukosma merger and optical communications business development and the funds raised by the company, we raised the company's annual revenue in 23-24-25 to 68920 million yuan, and the net profit returned to the parent was 1.41 million yuan, and the corresponding EPS was 1.10, 1.40, 1.71 yuan. Considering that the company is a scarce game console parts supplier of N Company in China, and the optical communication + VRAR business is expected to open a new growth curve, the future downstream new product release, company category expansion and new business extension are expected to bring performance elasticity beyond expectations, giving "highly recommended" investment rating for the first time.
Risk hint: high customer concentration