This report is read as follows:
On the one hand, the company expands production by raising funds, on the other hand, it binds major customers while horizontal mergers and acquisitions cut into areas such as data cables and vertical mergers and acquisitions to integrate household appliance parts industry chain to drive growth, covering for the first time, the target price is 27.30 yuan.
The "overweight" rating is given for the first time, with a target price of 27.30 yuan. It is generally believed that the company has low barriers in the cable industry, fierce competition in the industry, low gross profit margin and net profit margin, and limited room for growth. We believe that on the one hand, on the basis of binding Gree, Midea and other major customers, by raising funds to expand production, on the other hand, binding major customers at the same time through horizontal mergers and acquisitions into areas such as data cables and vertical mergers and acquisitions to integrate the household appliance parts industry chain. It is estimated that the operating income of the company from 2020 to 2022 is 15.58,30.25 and 4.525 billion yuan respectively, and the net profit belonging to the parent company is 1.06,1.58 and 342 million yuan, corresponding to 0.61,0.91,1.97 yuan of EPS. Considering that the company breaks through the capacity bottleneck and continues to cut into new areas, the company is given a target price of 27.30 yuan, corresponding to 30 times PE in 2021, with a "overweight" rating for the first time.
On the basis of binding Gree, Midea and other major customers, the company continues to expand its production capacity, the company's revenue growth will exceed expectations in the future, and the application of automation equipment instead of labor can effectively reduce the company's product cost and increase the net interest rate. The company's IPO investment project will be completed by the end of 2020, and the annual sales revenue is expected to be 648 million yuan, accounting for 42% of the 2019 revenue. The company's convertible bond project produces 300 million power connection components per year, and the sales revenue is expected to be about 1.1 billion yuan, accounting for 71% of the revenue in 2019. The increase in production capacity will increase the company's market share and revenue scale.
The company expands more large customers through horizontal mergers and acquisitions, and the integration of household appliance parts industry chain through vertical mergers and acquisitions will exceed market expectations. On the one hand, the company plans to buy a 100% stake in Tianjin Yongrong Tikang Communication Technology Co., Ltd by means of cash payment. The main products are MDF cable, DDF cable, coaxial cable, the products are mainly supplied to Huawei technology, ZTE Corporation, FiberHome and other customers. On the other hand, the company has established long-term cooperative relations with domestic and foreign well-known enterprises such as Midea, Gree Electric Appliances, Supor and Xinbao Electric Appliances, and has the opportunity to take advantage of key customers to expand more product lines through mergers and acquisitions to drive the growth of the company.
Catalyst: M & A landing, production capacity reaching production
Risk hint: M & An is lower than expected, and capacity expansion is lower than expected.
