A leading manufacturer of connectors, automotive electronics began a second growth curve. Electric Link Technology Co., Ltd. was established in 2006. Since its establishment, it has continued to be deeply involved in the field of RF connectors. In 2013, it expanded the application field of connector products from consumer electronics to automotive electronics through self-development. In addition, the company continues to expand its soft board and Pogo Pin product business through acquisitions, and continues to expand its product layout. Currently, the company's product layout is diversified, focusing on the two core fields of consumer electronics and automotive electronics, while extending to other related fields.
Automotive connectors: Domestic replacement is accelerating, leading to rapid business growth in many leading domestic customers. Currently, the connector industry is still dominated by overseas companies, but considering that China is currently the world's largest connector market and domestic NEV and other industries are developing strongly, domestic connectors have broad scope for domestic replacement. Automotive connectors have a wide range of applications and have higher performance requirements than consumer electronics connectors. Among them, high-voltage connectors and high-frequency high-speed connectors have high barriers. The industry is still dominated by overseas companies, and domestic manufacturers, such as electric connection technology, are rapidly catching up. The electrification and intelligence of automobiles continue to advance, and demand for high-frequency high-speed connectors is growing rapidly. The company has an in-depth layout of high-frequency high-speed connectors for automobiles. The product range is rich, and it has already entered the supply chain of many major domestic automobile manufacturers, and its customers are still continuously expanding.
Consumer connectors: We have been deeply involved in consumer connectors for a long time, and the forward-looking layout of BTB connectors is expected to benefit. Based on RF connection technology, Denlink is deeply involved in consumer electronics connectors, and endogenous epitaxial continuously improves product layout. The company's consumer electronics customers cover a number of leading smartphone companies, including Xiaomi, OPPO, Backgammon, Samsung, Honor, ZTE, and Huawei. In addition, the company is increasing its efforts to expand major overseas customers in the non-mobile consumer electronics industry to further optimize the existing customer structure. BTB connectors are widely used in PCB/FPCB connections in small portable devices such as mobile phones and computers, and have obvious advantages over traditional connectors. Furthermore, BTB connectors are widely used. Under the large-scale trend of 5G millimeter waves and Sub6G, BTB products with LCP antennas with superior comprehensive performance may open up broad growth space. However, BTB connectors have high technical barriers. The current trend of higher signal frequency and lighter equipment has transformed into technical difficulties in upstream BTB connector production in terms of size and signal transmission performance. Electric connection technology gradually laid out BTB technology research and development in 2014. After ten years of accumulation, the company's RF BTB products have been used in batches for core customers and have received a good market response. With the construction of 5G networks and expectations for large-scale implementation of millimeter waves, the high gross profit characteristics of BTB products are expected to enjoy the dividends of a sharp rise in volume and price.
Investment advice: Electric connection technology is a leading domestic connector manufacturer. It has long been deeply involved in consumer electronics connectors and has forward-looking BTB connector technology. In addition, the automotive connector business opens up room for long-term growth. We expect the company to achieve net profit of 6.66, 8.26, and 1,009 million yuan in 24-26. We selected Hongrida, Ruikda, and Yihua shares, which are also in the connector industry, as comparable companies, and give the company 36 times PE in 2024, with a target share price of 56.74 yuan for the first time, and give it a “strong push” rating.
Risk warning: Downstream demand recovery falls short of expectations, industry competition intensifies, automotive electronics business expansion falls short of expectations