[Investment points]
The company released its three-quarter report for 2023. The company achieved operating income of 368 million yuan in the first three quarters of 23 years, an increase of 3.11% over the previous year, and realized net profit of 101 million yuan, an increase of 23.82% over the previous year.
23Q3 achieved operating income of 125 million yuan, a year-on-year change of -7.43%, and net profit of 27 million yuan, a year-on-year change of -16.50%. In terms of cost ratio, the company's sales expense rate/management expense rate/financial expense rate/R&D expense ratio for the first three quarters of 23 years was +3.53%/+19.96%/-6.23%/+13.39%, respectively, a year-on-year change of +0.81pcts/+4.12pcts/-5.2pcts/+1.38pcts.
Leading domestic industrial control connector. The field of industrial control involves many complex application scenarios, and its connectors often have the characteristics of multiple varieties, small batches, and customization. According to Bishop & Associate, the global industrial control connector market in 2021 was about 9.98 billion yuan, with a year-on-year growth rate of 29.30%. The company is a leading domestic industrial control connector, and its products can be applied to servo motors, PLC, robotic arms, industrial computers, etc. Through more than 20 years of intensive cultivation, the company has accumulated customers such as Huichuan Technology, Delta Electronics, Tyco Electronics, Siemens, Schneider, and Mitsubishi. In the context of domestic substitution and the long-term strategy of following major international industrial customers overseas, the company is expected to further increase its market share and break the current competitive pattern dominated by major international manufacturers.
Automobiles and new energy connectors go hand in hand. 1) In the automotive field, the company's products can be used in three-electric systems, millimeter wave radar, in-vehicle media equipment and high-definition video systems, and have entered the supply chain systems of OEMs such as Cyrus, Changan, BYD, and SAIC Motor. The company has entered the field of high-frequency high-speed vehicle connectors through its subsidiary Dongguan Weikang. Customer development is progressing smoothly, which is expected to bring additional volume to the automotive connector sector; 2) In the field of new energy, the company's products are mainly used in solar and wind energy inverter systems, and now it has developed customers such as Sunshine Power, Goodway, and Solaredge. The company has deep ties with strategic customers through its Hefei subsidiary and Thai subsidiary, and has greatly increased production capacity through its Kunshan subsidiary to form comprehensive coverage of optical storage and charging.
Robotic connectors bring huge room for imagination. In the field of robot connectors, the company's WAFER series, WD series wire-to-board series and other robot connectors have entered mass production, and has established cooperative relationships with robot manufacturers such as ABB, KUKA, and ESTON. Both industrial robots and humanoid robots require the use of medium and low voltage connectors, and the latter requires higher miniaturization, precision, and reliability of connectors. Currently, the value of the connector for a single industrial robot exceeds 600 yuan, while the value of the stand-alone humanoid robot connector has increased unabated. As a rare robot connector target in China, the company is expected to benefit from increased penetration of industrial robots and large-scale mass production of humanoid robots.
[Investment advice]
The company is a leader in industrial control connectors. Revenue from automotive and new energy connectors continues to grow, and the robot connector business is expected to benefit from the industrialization of humanoid robots. We forecast that the company's revenue for 2023/2024/2025 will be 532/6.87/972 billion yuan, with year-on-year growth rates of 10.87%, 29.09%, and 41.34% respectively, net profit of 1.41/1.72/226 million yuan, an increase of 25.40%, 21.99%, and 31.48%. The current price corresponding to EPS is 1.28, 1.56, and 2.05 yuan, respectively, and PE is 41, 33, and 25 times, giving it an “increase in holdings” rating.
[Risk Reminder]
Customer development has not progressed as expected;
The pace of expansion of production capacity fell short of expectations;
Competition in the industry has intensified.