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共进股份(603118):网通设备代工龙头再出发 数通业务有望开启第二成长曲线

Gongjin Co., Ltd. (603118): Netcom equipment OEM leader re-starts digital communication business and is expected to start a second growth curve

華創證券 ·  Aug 22, 2023 18:22

The company is a leading equipment contract manufacturing enterprise in China, with a strong market competitive advantage. The company focuses on the R & D, production and sales of broadband communication terminal equipment, mobile communication and communication application equipment, covering intelligent communication services, mobile communication services and other services, in which intelligent communication services are divided into network services and Datong services. In recent years, the company's operating income has basically maintained the growth trend, with revenue of 10.974 billion yuan in 2022, an increase of 1.53% over the same period last year. Among them, the development of Netcom business is stable, affected by the greater demand for switches at home and abroad, Datong business is growing rapidly, and the proportion of revenue is increasing year by year, which has become a new growth engine. As the leader of domestic contract manufacturing, the company has obvious scale advantage, business income is in the leading position in the industry, at the same time, the global layout, sufficient overseas production capacity, with supply chain advantages, has a strong market competitive advantage.

With the superimposed demand for AI in the digital economy, the prosperity of computing equipment represented by switches and servers is rising. This year, ChatGPT detonated the market heat of the AI model, and the trend of diversification and upgrading of computing power is clear. As one of the core devices to build the computing network, the switch undertakes the function of data forwarding. Under the background of accelerating the landing of the AI scenario and putting forward higher requirements for the transmission capacity of the computing network, the market demand for data center switches and port speed requirements are increasing. In terms of servers, it is expected that global server shipments will grow steadily, and AI servers will become a new growth point in the server industry. Under this background, domestic server manufacturers are also expected to strengthen their overseas layout.

The market share of the company's Datong business is expected to continue to increase, becoming the company's second growth curve. At present, the domestic Datacom market is in a period of expansion, the data center construction of operators and Internet enterprises is making steady progress, and the downstream capital expenditure driven by the superimposed AI model is expected to further tend to the computing side, and the demand for digital communication products such as switches and servers is increasing. At present, the revenue scale of the company's 100G and 400G high-speed switches continues to increase, and the share of campus and small and medium-sized enterprise switches in key domestic and overseas customers continues to grow. The company has advantages in product layout, customer cooperation, R & D investment and capacity reserve, which is expected to promote Datong business to become the company's second growth curve.

The company Netcom's business revenue has increased steadily, and the innovative business has blossomed more. The company has been engaged in Netcom business for many years, and its main business model is ODM/JDM mode, and its products are mainly composed of PON series, AP series and DSL series. With the emergence of high-bandwidth services such as high-definition video-on-demand, online games, video conferencing and network television, users' demand for access bandwidth will further increase. Under the background of "optical advance and copper retreat", the company's PON series products are expected to continue to grow. The company has good development prospects in mobile communication business, sensor closed testing business, automotive electronics business and so on. It is expected that with the continuous improvement of the prosperity of the industry in the future, the revenue scale is expected to continue to grow.

Investment suggestion: the company tamps the basic disk of performance growth, and Netcom business is expected to develop continuously and stably. Under the background of the boom of switch industry driven by the outbreak of digital economy and computing power demand, the company's Datong business is expected to maintain a high-speed development trend, bringing about the second curve of the company's performance growth. At the same time, mobile communications business, sensor closed testing business and automotive electronics business are also expected to achieve sustained and rapid growth under the pull of the prosperity of the industry, and can be expected in the future. We estimate that the company's operating income from 2023 to 2025 will be 119.89, 152.09 and 18.992 billion yuan, and the net profit will be 5.03,6.30 and 742 million yuan. With reference to ZTE Corporation, Ziguang shares, Feilingcos and other comparable company valuations, the company was given a 22-fold PE in 2023, with a target price of 14.00 yuan, giving a "strong push" rating for the first time.

Risk Tip: the demand of the industry of Datong products is lower than expected, the company's market share in the field of digital communication is not as expected, the development of traditional business is not as expected, and the development of innovative services such as mobile communications is not as expected.

The translation is provided by third-party software.


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