Three growth drivers amid high base for growth

Transcription

1 14 Aug 2012 Equity Research Report Company Research Electronics Huizhou Speed Wireless Technology (300322) Investment value analysis report Three growth drivers amid high base for growth Investment Highlights Leading supplier of terminal antenna in domestic market. As the largest terminal antenna supplier in domestic market, the Company mainly provides components that are used in the consumer electronics products such as cell phones. The Company is the largest supplier for the cell phone business of ZTE and TCL, and has tapped into the supply chain of tier-i global brands such as Samsung and Amazon. It posted revenue of Rmb250mn, gross margin of 36%, and net margin of 15% in Antenna industry: rises of both sales volume and selling price amid industrial transferring. The development of consumer electronics raises higher requirements on the performance and functions of antenna, and drives the increase of the price and consumption of antenna. The antenna procurement from high-end cell phones producers saw a growth of 5x-10x. Besides, due to factors such as cost and response speed, the global antenna market, which is dominated by the European and American manufacturers, is transferring to mainland China. The leading producers in mainland China have begun to tap into the supply chain of tier-i global clients including Samsung. The industrial transferring will be accelerated. More visible leading edge. Design, testing, and clients are the major barriers in the antenna industry. The Company boasts the largest business size among domestic antenna producers, and owns much more designers and patents than its peers. Besides, the Company has formed testing barrier with its nine three-dimensional darkrooms all over the country. The Company boasts the best client resources in the domestic market, and has already successfully tapped into the high-end cell phones supply chains of global tier-i clients including Samsung, thus showing a gradually visible leading edge in domestic market. Buy (Initial Coverage) Last price: Rmb Target price: Rmb 19.8 CITIC Securities Research Angus Lin Tel: linzm@citics.com Practicing license no.: S Fan Zhang Tel: fanz@citics.com Practicing license no.: S Performance Relative to lndices 30% 25% 20% 15% 10% 5% 0% 2012/6/8 2012/6/ /7/6 2012/7/ /8/3-5% -10% CSI 沪 深 Huizhou 硕 贝 德 Speed Wireless Source: CITIC Securities Quantitative Investment Analysis System Main Data S&P/ CITIC300 (Points) Total equity/shares o/s (mn) /23.35 LTM High/low (Rmb) 17.65/ month absolute gain 11.66% 6-month absolute gain --% YTD Absolute gain --% LTM Average daily turnover (Rmb mn) Technology (300322) Upgrade of products and larger procurements from major clients will direct boost the Company s growth. The Company s rapid growth is mainly boosted by three drivers: (i) the upgrade of products by its current clients such as ZTE, which is expected to boost the unit price of procurement by around 3 times; (ii) as the Company has tapped into the supply chain of Samsung s high-end smartphone Galaxy SIII, the large Please read the disclaimer at the end of the report

2 cell phone shipment of Samsung and the unit procurement price of ~Rmb10/set will lead to immense growth potential for the Company; (iii) the Company boasts significant advantages in NFC antenna R&D and customer base, thus the exponential growth of NFC antenna sales will provide a robust driver for the Company s growth. Potential risks: change of the competition landscape of the industry caused by the product integration of antenna and connectors; slower-than-expected growth of new products including FPC and NFC. Investment recommendations. We forecast the Company s 2012E/13E/14E EPS at Rmb0.56/0.86/ 1.18, with CAGR of around 50%. In reference to the 25x 2013E PE of GoerTek (002241), which presents a similar industrial attribute and a comparable growth rate to the Company, and given the differences between the two companies, we apply a target price of Rmb19.8 per share to Huizhou Speed Wireless Technology, equivalent to 35x/23x 2012E/13E PE. Initiate our coverage on the Company with BUY rating. Item/Year E 2013E 2014E Turnover (Rmb mn) Growth rate YoY (%) Net (Rmb mn) Growth rate YoY (%) EPS (Rmb) Consensus EPS (Rmb) ROE (%) PE (x) PB (x) EV/EBITDA Source: CITIC Securities Quantitative Investment Analysis System Note: closing prices as of 10 Aug 2012; consensus is based on Wind s survey Please read the disclaimer at the end of the report

3 Income statement (Rmb mn) Balance Sheet (Rmb mn) Indicators E 2013E 2014E Indicators E 2013E 2014E Revenue Cash and cash equivalents cost Inventories Gross margin 37.9% 36.2% 31.5% 33.9% 34.3% Account receivables Business tax and Other current surcharges assets Current expenses Assets-Total Property, plant 2.7% 3.1% 3.1% 3.1% 3.1% expenses ratio and equipment Administrative Long-term equity expenses investment Administrative expenses ratio 14.8% 13.3% 13.7% 13.7% 13.7% Intangible asset Finance expenses Other long-term assets Finance expenses Non-Current 1.2% 1.8% -0.3% 0.1% 0.1% ratio Assets- Total Investment Total Assets Interest-bearing bank loans margin 18.9% 17.2% 14.5% 16.6% 16.9% Account payables Non-operating Other current Non-operating Current expense liability-total Income-total Long-term Income tax Other non-current Income tax rate 27.4% 15.6% 15.0% 15.0% 15.0% Non-current Total Minority interests Total Liabilities Net profit attributable to Issued Capital parent company Net margin 14.3% 14.7% 12.8% 14.4% 14.6% Reserves Cash flow statement (Rmb mn) Indicators E 2013E 2014E Minority interests Owner s Equity Total Liabilities & Equities Pre-tax profit Key Indicators E 2013E 2014E Income tax paid Growth rate % Depreciation & amortization Revenue Changes in working capital Others Net Income margin operating (%) CAPEX Gross margin (%) Investment EBIT Margin Disposal of assets EBITDA Margin Others Net margin investing Returns (%) Equity issuance ROE Please read the disclaimer at the end of the report 14 Aug

4 Changes in ROA Dividends payout Others (%) Others Liability asset ratio financing Income tax rate Net increase of cash and cash equivalent Dividend yield Source: Wind, CITIC Securities Research forecast Please read the disclaimer at the end of the report 14 Aug

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