Deeply ploughing the field of communication modules for 15 years, is a domestic front-line supplier of Internet of things modules. Fang Technology was founded in 2006 and listed in the Science and Technology Innovation Edition in 2020. The company focuses on laying out and building the vertical application integrated service capability of module + terminal + solution, focusing on the connection link of the Internet of things at the beginning of its establishment, and the main product is the wireless communication module. after that, it has realized the extension from the module to the downstream terminal products and solutions. The company's Internet of things module business is mainly oriented to smart energy scenarios, the main customers include national network Gansu Electric Power Company, Samsung Medical, etc.; the communication terminal business is mainly oriented to vehicle networking and commercial retail scenarios, and the main customers include international car products supplier Harman, Spanish telecom operator Telefonica, etc. The solution business is mainly focused on the industrial Internet of things, smart cities and other areas, the existing solution cases include Gree Electric Appliances, Haier Smart Home, Guizhou Gas and so on.
With the advent of the era of the Internet of everything, module demand erupts. The iteration of communication technology and the outbreak of downstream applications will lead to an increase in the demand for modules. at present, the industry is upgrading from 2G/3G to 4G/NB-IoT, while manufacturers accelerate the development and trial of 5G modules. The demand for 4G and LPWAN communication modules will be the main driving force in the future. According to IDC, the global Internet of things market is expected to grow to US $1.7 trillion in 2020, with a compound annual growth rate of 17%. According to China Economic and Social data, the overall industrial scale of the Internet of things in China has exceeded 1.5 trillion yuan in 2019. At the same time, we will promote the planning and layout of Internet of things-aware facilities, and the number of MM connections in the public network will exceed 1.7 billion, and module demand will break out soon.
Smart meter is developing rapidly, and the company is the leader of module manufacturers. With the release of demand for smart meters, In-Stat research points out that the global penetration rate of smart meters will reach 59% by 2020. According to WoodMackenzie, the total number of smart meters in the world will increase from 670 million in 2017 to more than 1.2 billion in 2024, with an CAGR of 8%. China's smart meters are in the renewal cycle. With the withdrawal of 2G/3G and the popularization and improvement of 4G network, the forward-looking Industrial Research Institute predicts that from 2016 to 2020, the two network companies will invite bids for 503 million smart meters, of which 463 million will be replaced.
The company's wireless communication module products are mainly used in smart meters in smart energy and are in a leading position in the field of smart grid. According to the company announcement, the company's 4G wireless communication module shipments accounted for more than 50% of the total amount of intelligent watt-hour meters purchased through bidding in the State Grid in the past three years, and all kinds of module products have strong anti-interference ability in harsh operating environments. technical advantages such as reliability are obvious.
The car networking scene is of high value, and the company accelerates the expansion of overseas OBD. The Internet of vehicles is one of the most valuable segments of the Internet of things, and its products mainly include two categories: in-vehicle front-loaded T-BOX and in-vehicle rear-loaded OBD. According to Roland Berger, the penetration rates of in-car front and rear loading will be about 40% and 30% respectively by 2025. According to the global annual automobile sales volume of 80 million yuan and the vehicle front / rear loading terminal price of 1000 yuan / 350yuan respectively, the global vehicle terminal front / rear loading market will be about 32 billion yuan and 8.4 billion yuan respectively in 2025. In the field of vehicle preloading, the company mainly provides 4G vehicle specification-level wireless communication module, and its vehicle specification-level LTE wireless communication module belongs to the field of high-end modules and has certain technical barriers. In the field of vehicle afterloading, the 4G intelligent OBD products independently developed by the company have successfully solved the problem that the traditional non-intelligent OBD terminal has a single function and can not be expanded. The product is mainly sold in overseas automotive afterloading markets, mainly in North America and Europe. According to the company's website, the company has developed major overseas OBD customers, including Harman, CPON, Grupo Next and other major overseas OBD customers. The products cover Sprint, AT&T Inc, Spain Telecom, VIVO, GrupoMasmovil and other global operators.
With the introduction of the "two clouds", the solution business is expected to expand rapidly and support the company's long-term development. In the second quarter of 2020, the company launched well-managed cloud and well-connected cloud, and put forward a new product strategy of "multi-platform, full-system, global certification and full lifecycle service".
Square pipeline cloud is the industry's first communication optimization and management platform, which can carry out monitoring, optimization, fault prediction and remote diagnosis management of Internet of things wireless communication pipeline, and solve many wireless communication problems of Internet of things. At present, it has been adopted by smart water, smart gas and other industries. Access to the cloud can dock all the mainstream cloud platforms (public cloud / private cloud, etc.), eliminate the device differences of the upper applications, achieve "one place to collect, use in multiple places", manage all access devices in a unified way, and grasp real-time dynamics; it can provide flexible and rich data / message service platform capability interfaces to external applications. Based on the "cloud-management-end" capability, the company will carry out the research and development of metro IoT solutions for smart cities, which will become the long-term driving force of the company's future business.
Investment suggestion: we expect the company's income from 2021 to 2023 to be 1.127 billion yuan (+ 96.5%), 1.669 billion yuan (+ 48.1%) and 2.268 billion yuan (+ 35.9%) respectively; the net profit is 63 million yuan (- 184.3%), 105 million yuan (+ 66.0%) and 175 million yuan (+ 67.0%) respectively, and the corresponding PE is 38-23-14. We give the company 40 times PE in 2022, corresponding to a market capitalization of 4.2 billion, with a target price of 45.60 yuan. Cover for the first time, giving a "buy-A" investment rating.
Risk hint: the company's product research and development and industrialization are not as expected, the industry competition is intensified, and the promotion of vehicle networking is not as expected.
