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Lixun Precision (002475) Annual Report Commentary: Consumer Electronics Helps Increase Communication

Lixun Precision (002475) Annual Report Commentary: Consumer Electronics Helps Increase Communication
The company’s growth path is clear. It connects PCs, consumer electronics, communications, and automobiles with connection lines, and extends new business based on fundamentals.The consumer electronics business is becoming bigger and stronger, providing systematic solutions such as connection cables, acoustics, and radio frequency for large customers. The leading layout of the automotive and communications business is the core growth point of subsequent relays. High performance growth, consumer electronics business accounted for 75%.The company released its 2018 annual report, realizing revenue of 35.8 billion yuan (+ 57%), and net profit attributable to mothers27.2.3 billion (+ 61%), which basically meets the previous guidelines.By business, consumer electronics revenue was 26.8 billion (+76.5%), accounting for 75% (+8.2pcts); communications business revenue 21.52 billion (+ 30%), accounting for 6% (-1.25pcts); automotive business revenue 17.28 billion (+ 53%), accounting for 4%.82% (-0.13pct); other connector revenue 14.300 million (+ 184%), accounting for 4% (+1.7北京夜网8pcts).We believe that the consumer electronics business led by AirPods is still the core factor driving the growth of 2018’s performance. Among the 11.1 billion incremental revenues of the consumer electronics business, AirPods is expected to contribute 6 billion. IPhone end acoustics, antennas, motors, and wireless charging contribute about 40%. 100 million, others are mainly iWatch and TypeC business. The overall gross profit margin is stable, and R & D expansion continues to strengthen.The company reported overall gross profit margin of 21.05% (+1.05pcts), mainly because the gross profit margin of consumer electronics business has rebounded to 21.19% (+1.74pcts), we expect that the company will work closely with customers to increase the proportion of high gross profit design + manufacturing modular products.Reported R & D expenses reached 25.15 billion (+ 63%), accounting for 7 of revenue.02% (+0.26pct), the company’s many years of high R & D investment, in addition to accounting for more than 70% of the consumer electronics business, as well as the leading 5G communications and automotive business, including antennas, filters, automotive wiring harnesses, connectors, automotive electronics.ROE continues to improve, +3 per year in 2018.86% to 17.95%, mainly due to the company’s net interest rate (+0.19 points), asset turnover (+13.5pcts) performance is better, at the same time leverage has also improved. Looking ahead to 2019, the consumer electronics business is expected to fully blossom.The company announced the first quarter performance forecast in the previous period, and the net profit attributable to the parent is expected to reach 5.66-6.3.2 billion (+70%-+ 90%), exceeding market expectations. We believe that it mainly benefits from a client category and shared speedup. In addition to lightning, which contributes stable revenue, watch products, wireless charging, linear motors and other business accelerationGrowth, wireless charging is the main supply for customer A, and the motor business share increases.The company’s acoustics business is expected to exceed expectations. Among them, the number of acoustic components on the iPhone side will further increase, and on the Airpods side, we predict that the company will transition about 5-6 million pairs in the first quarter, and it is expected to reach 24-25 million pairs in 2019.We believe that the follow-up companies are expected to realize AirPods entering other categories of products, and further improve the coverage of consumer electronics business. From consumer electronics to communications, automobiles, the company’s short, medium and long-term development is expected.In the short term, customer-centric consumer electronics is still the company’s main source of revenue, accounting for more than 70%.In 2019, AirPods companies will benefit as the main foundry (accounting for about 50%).In the medium to long term, the company has been leading the communications and automotive businesses. The communications category includes server wiring harnesses (accounting for 60%), radio frequency (30%), and optical modules. Among them, radio frequency products benefit from the significant growth of 5G. It is expected thatThe communications business continued to achieve a high growth rate of more than 50%; the automotive business was mainly traditional automobiles, new energy vehicle wiring harnesses, structural parts, automotive electronics and other products. It was actively deployed through Kunshan Lixun, Source Optoelectronics, and German SUK. Risk factors: The performance of core customers is lower than expected, the ability to integrate new businesses is weak, and market competition is intensifying. Investment suggestion: We maintain the company’s EPS forecast for 2019/2020 of 0.87/1.06 yuan and forecast its EPS in 2021 is 1.27 yuan, which will be changed to 0 after the subsequent transfer of share capital.67/0.81/0.97 yuan, considering a client category expansion and leading premium, giving 35 times PE in 2019, corresponding to a target price of 30.41 yuan, maintain “Buy” rating.