Benefiting from high-quality and stable customer resources and strong demand for downstream applications, the company's performance is good. With the rapid expansion of high-quality customers (Lixun Precision, BYD, etc.), as well as consumer electronic connectors and new energy vehicle connectors, revenue has increased rapidly from 460 million in 2017 to 720 million in 2019, with CAGR reaching 25.5%. In the first three quarters of 2020, revenue was 580 million yuan (+ 17.3% compared with the same period last year), 68.22 million yuan (+ 22.4%) was returned to the mother, and 66.65 million (+ 24.1%) was deducted from non-return to the mother. Q3 in a single quarter, the company achieved revenue of 260 million yuan (year-on-year + 33.5%, month-on-month + 34.0%) and returned to its mother of 29.46 million yuan (year-on-year + 13.6%, month-on-month + 33.3%). Revenue and profit maintain double high growth rate. Under the continuous iteration of the product, the gross profit margin increased steadily, with a gross profit margin of 28.12% in the first three quarters of 2020, which was + 2.29pct compared with the same period last year.
New energy vehicle connectors open up incremental space. China's domestic 30 billion market in 2025 has overtaken Europe and the United States to become the world's largest connector market (32% in 2017), of which automotive applications account for 24%. The new energy vehicle connector is a new incremental market from 0-1, which is carried in a high-voltage frame (greater than 700V) as a safety component, which is used to stably transmit power and signals between power batteries and high-voltage parts. the average price of a single car has risen from 650 yuan of traditional cars to 1300 yuan of new energy vehicles, driving the domestic market to reach 30 billion and the global market of 80 billion in 2025. The first three manufacturers (Tyco, Yazaki and Delphi) account for 70% of the share. Domestic manufacturers are expected to tear up the originally closed supply system in the trend of electrification. At present, manufacturers, including companies, are gradually expanding into the field of electric vehicles.
"Core technology + brand customers" to build competitiveness, fund-raising projects to enhance profitability the company takes consumer electronic connectors and components, new energy vehicle connectors and components as leading products. On the one hand, BYD continues to expand its automotive business, currently supplying BYD with soft and hard connection products (battery rings, battery connectors, etc.) and BMS sampling harness connector products (K8/K9 bus battery harness, E5 passenger car battery harness, etc.). BYD accounted for 5.8% of revenue in 2019 (7.5% in 2018), and will continue to develop products to auto companies such as Great Wall Motor and SAIC Wuling. On the other hand, the fund-raising and investment of new projects will slow down the production pressure and add new battery precision structure projects (an investment of 66.29 million yuan, an annual production capacity of 47 million pieces, an average annual net profit of 16.27 million yuan after reaching production, and an internal rate of return of 17% before tax), and profitability is expected to rise.
Risk Tips:
The risk of demand fluctuation in the downstream market, the new project construction is less than the expected risk.
Investment suggestion: in 20-21-22, the annual EPS is estimated to be 0.73, 0.94, respectively, 1.19 yuan, corresponding to PE, respectively, 42.4, 32.9, and 26.0 times, covering for the first time and giving an overweight rating.