Investment summary
Dual wheel drive for military and civilian use, focusing on core breakthroughs in the main business. Shenglu Communications is a leading domestic provider of communication equipment products, providing customers with communication hardware products such as antennas and RF devices. Since divesting its automotive electronics business, Shenglu has refocused on the two major military and civilian application scenarios. Currently, the company has a plant area of 67,000 square meters, more than 1,000 employees, and total assets of about 4.259 billion yuan at the end of 2023.
The 5G base station effort is nearing its end, and the construction boom is declining. On the supply side, the construction of Acer base stations is improving, operators' 5G capital expenditure has plummeted, and the related collection scale continues to slow down; on the demand side, coverage of mainstream application scenarios is becoming more and more adequate, the number of mobile phone terminal and package users continues to rise, and the penetration rate may soon peak, and transformation and adjustment are in urgent need of improvement.
Focus on breakthroughs in the Red Sea market and forward-looking shift in development logic. Shenglu Communications has three major advantages: 1) The strategic results of major customers are remarkable. Shenglu has successfully achieved two-way expansion of operations and equipment suppliers, and the brand effect is becoming more and more evident; 2) microwave antenna research and development, customer response and product preparation have been greatly improved, and the large-scale mass production delivery stage has successfully arrived; 3) The 5G interior construction phase has begun, taking advantage of the development of industry segments, and the room division antenna is expected to begin the long-term release phase.
Two major emerging businesses are helping to grow, and the second growth curve is expected to open. At the satellite level, the scarcity of frequency tracks has forced countries to speed up the deployment of extraterrestrial low orbits. The batch launch of satellites has begun, and an inflection point in industry growth has arrived; at the level of autonomous driving, self-driving applications are gradually being promoted, the company's GNSS-related equipment research and development is progressing in an orderly manner, and self-driving projects are being implemented at an accelerated pace.
Core technology builds core competitiveness, and a moat for military electronics companies to further develop. Multiple microassembly production lines Nanjing Hengdian and Chengdu Innovation have accumulated deep technology for 20 years. They have established technical advantages in various fields such as ultra-broadband up-and-down frequency conversion, microwave circuit microassembly, and microwave component interconnection. They have built 0.1 million purification production workshops. Multiple microassembly production lines are parallel, and manufacturing and delivery capabilities are strong, laying a good foundation for long-term stable development.
Investment advice
First coverage, giving a “buy” rating. The company's revenue for 24-26 is estimated to be 1.513 billion yuan, 1.936 billion yuan, and 2.458 billion yuan, respectively; net profit to mother is 0.221 billion yuan, 0.29 billion yuan, and 0.354 billion yuan, corresponding to EPS of 0.24 yuan, 0.32 yuan, and 0.39 yuan.
Risk warning
The technology iteration process increases risks; emerging business growth falls short of expectations; changes in the international landscape and trade frictions increase risks.