Introduction to this report:
The company is a leading domestic enterprise focusing on mobile phone distribution and retail. It has significant competitive advantages. It promotes sales network encryption and overseas and innovative business layout. With the recovery of consumer electronics and the increase in the penetration rate of AI mobile phones, future development is worth looking forward to.
Key points of investment:
First coverage, increased rating. We predict that the company's EPS for 2024-26 will be 0.59/0.65/0.71 yuan, with a growth rate of 11/11/ 10%; referring to comparable company valuations in the same industry, the company will be given a target price of 14.5 yuan, and the initial coverage will be given an increase rating.
More than 20 years of deep cultivation have created industry leaders, and bound leading brands to establish a basic market. 1) The company has a mobile phone as the core (accounting for about 90%) distribution and retail businesses such as 3C digital, new energy vehicles, FMCG, etc., with revenue increasing from 56 billion yuan to 92.2 billion yuan, with a CAGR of 13.3%; 2) The equity structure is concentrated, with a direct and indirect shareholding ratio of about 33.06%, and the core executives have rich experience and have been working in the industry for many years; 3) With Apple:
The subsidiary, Kudong Digital, is the largest authorized Apple dealer in China, operating 174 APR stores+over 3,000 authorized stores and outlets; 4) and Honor: The company is the channel partner and omni-channel retail service provider with the largest shareholding ratio among Honor shareholders. On the one hand, it will help Honor expand domestic and foreign markets, and on the other hand, it is hoped that the benefits will be realized in the future.
Smartphone shipments are picking up at the bottom, and folding screens and AI phones are expected to catalyze a new round of switching demand.
1) The policy supports the development of the consumer electronics industry, and has benefited from the intensive release of new 5G flagship devices and the contrarian growth of folding screen phones, and domestic mobile phone shipments have rebounded steadily; according to IDC, domestic smartphone market shipments in 2024Q1 are about 69.26 million units/ +6.5%, recovering for three consecutive quarters; 2) The market share of leading domestic smartphones is relatively stable. In recent years, Honor and Apple rank among the top five in terms of volume; 3) Honor's share of folding screens and AI phones are growing at an accelerated pace. According to Canalys, AI phones account for the highest share of folding screen phones; 3) Folding screen and AI phones are developing at an accelerated pace. According to Canalys, AI phones account for the highest share of folding screen phones; The proportion of smartphones It will be raised from 5% to 45% in 2027, thereby catalyzing consumer demand for switching. As a leading domestic mobile phone channel, the company expects significant benefits.
The four major advantages build core barriers and establish future growth drivers, and the high dividend policy is expected to continue. 1) The company's core strengths establish high-quality asset attributes: ① Top brand resource advantages, a national first-class dealer for top brands such as Apple, Honor, and Samsung; ② Channel network advantage, domestic T1-T6 omni-channel coverage of more than 100,000 stores, channel endowment advantages to promote the development of businesses such as smart wearable devices, new energy vehicles, value-added services and FMCG; ③ supply chain system advantages, 5 major distribution centers, more than 30 regional warehouses and overseas branches; ④ digital advantages, etc.; 2) 2023 dividend of 496 million yuan, dividend rate of about 76% (Over 60% per year). Considering the company's steady business model, abundant cash on hand, and new business expectations to increase profit levels, we judge that the dividend policy may continue to be higher in the future.
Risk warning: The recovery of the consumer electronics industry is lower than expected, the expansion of new retail and other innovative businesses is lower than expected, overseas business risks, dividends are lower than expected, etc.