Actively promote the production of new projects to ensure the steady growth of MIM business. The prospect of folding screen / smart wear is expected to release the annual report on April 19. In 2020, the company will achieve revenue of 1.564 billion yuan (YoY: 6.19%) and return to its mother net profit of 142 million yuan (YoY:-17.17%), which is lower than our previous forecast of 153 million yuan. 4Q20 realized revenue of 450 million yuan (YoY: 1.64%) and net profit of 55 million yuan (YoY:-20.19%).
Under the background that COVID-19 's epidemic situation had a great adverse impact on the demand for mobile phones and other terminals, the company's revenue growth over the same period last year was mainly due to the fact that 2H20 vigorously promoted the conversion of new projects to volume production, which ensured the steady growth of MIM business; the decline in net profit was mainly due to the decline in gross profit margin due to intensified competition in some traditional MIM business.
We are optimistic about the development opportunities of the company's MIM business in emerging markets such as folding screen and smart wear. it is estimated that in 21-22-23, the EPS will be 1.772.36 yuan 3.10 yuan, with a target price of 53.13 yuan, maintaining the buy rating.
Increased competition in traditional MIM business led to a decline in gross profit margin, which promoted the transformation from "manufacturing" to "smart manufacturing" in the past 20 years. (YoY:-8.05pct), mainly due to: 1) intensified competition in some traditional MIM business; 2) the epidemic led to uneven distribution of orders throughout the year and lower production efficiency than expected. During the 20-year period of the company, the expense rate was 18.62% (YoY:-2.84pct), of which the sales expense rate increased from 0.40pct to 2.26% compared with the same period last year, mainly due to the increase in market development costs; the management expense rate decreased from 3.59pct to 6.68% over the same period last year, mainly due to the company's optimization of management, cost reduction and efficiency improvement. The R & D expenditure rate increased to 9.54% compared with the same period last year, and a number of key R & D projects such as hinge projects and wearable watch case projects of the company's folding screen mobile phones have entered a stage of intensive development. In addition, according to the announcement, the company intends to spend 52 million yuan to purchase AI appearance defect testing equipment and AI computing management platform to promote the transformation from "manufacturing" to "smart".
With the rapid development of folding screen and smart wear, the company's wearable device revenue increased by more than 70% year on year in 2020. In 2020, the company's smartphone product revenue was 1.14 billion yuan (YoY:-5.92%). According to IDC data, global smartphone shipments fell by 672% to 1.280 billion units in 2020 compared with the same period last year, but global folding screen phone shipments increased by 767.30% year-on-year to 194.73 million units. The company's products are used in Apple, OPPO, vivo, Samsung, Xiaomi and other well-known brand terminals, we are optimistic about the broad application space of the company's MIM products in folding screen phones. In 2020, the company's wearable product revenue was 201 million yuan (YoY: 70.62%). According to IDC data, global wearable device shipments increased by 28.36% to 445 million units in 2020 compared with the same period last year. IDC expects shipments of 782 million units in 2025, corresponding to 11.96% CAGR in 21-25 years. The global wearable device market is in the ascendant and has broad prospects.
The leading potential of MIM remains, giving a target price of 53.13 yuan and maintaining the buy rating. Taking into account the increased competition in some of the company's traditional MIM business, we adjust the company's homing net profit forecast for 2122 to 273 million yuan (previous value: 252 MIM), and the 23-year homing net profit is expected to be 358 million yuan. With reference to the company's PE valuation of 24.93 times the average Wind consensus expectation in 2021, and considering the development potential of the company's MIM business in smart wear, folding screens and other emerging markets, the company is valued at 30 times PE in 2021, with a target price of 53.13 yuan (previous value: 71.86 yuan) and maintaining the buy rating.
Risk hint: MIM process penetration rate is lower than expected; folding screen mobile phone shipments are less than expected risk.