Liangxin Electric (002706): R & D R & D Positioning Demands Resonance and Growth

Liangxin Electric (002706): R & D R & D Positioning Demands Resonance and Growth
The investment highlights for the first time covered Liangxin Electric Company (002706) with an outperforming industry rating with a target price of 9.96 yuan, corresponding to 27 in 2019 and 2020.2 with 22 times P / E.The reasons are as follows: The market space of China’s low-voltage electrical appliance industry in 2018 was 8.43 million yuan, with stable growth.The market structure is clearly subdivided. The high-end market is mainly occupied by overseas giants with high technical barriers and profit margins.The company is a leader in the breakthrough of domestic high-end low-voltage electrical appliances. R & D stand-alone, focusing on high-end and low-voltage electrical appliances, driving high profit growth.The company’s R & D expense rate is stable at more than 6%, and R & D personnel account for more than 20%, leading the industry counterparts.Continue to iterate with R & D-driven highly competitive 四川耍耍网 products, supporting high-end experimental and simulation platforms to respond quickly to the needs of major customers.From 2009 to 2018, the revenue CAGR reached 19%, the net profit CAGR reached 39%, and the net profit margin remained above 12% and continued to increase. Customer structure and quality are excellent, and demand growth is worry-free.The downstream of the company is mainly in the real estate, new energy and other leading areas.The company expects that the completion of the real estate leader will remain stable and the concentration will increase, further benefiting the company.New energy installations are picking up in 2019, and we believe that high growth can be maintained in 2020 to boost demand. Emerging needs are laid out in advance, and smart homes and 5G base stations bring incremental growth space. The company in the 5G base station field cooperated with Huawei to develop a dedicated 5G circuit breaker. We believe that it is expected to further support the base station low-voltage electrical system and benefit from the acceleration of 5G construction.The company’s smart switches have entered Vanke’s supply, benefiting from the growth in demand for smart homes. What makes us different from the market?The market believes that the company is in conflict with the impact of real estate, and it is difficult for other markets to make rapid breakthroughs.The company believes that the completion of real estate will maintain growth and increase concentration, and business growth is sustainable; 5G, new energy and smart homes bring room for growth. Potential catalyst: 5G and smart home low-voltage electrical appliances have progressed more than expected. Profit forecast and estimationIn 2021, the EPS will be 0.37 yuan, 0.45 yuan, 0.54 yuan, CAGR is 22%.The company currently has a maximum of 8.34 yuan, corresponding to 22 in 2019-2020.7 and 18.5x P / E.We predict that the company will return 2 to its net profit in 2019-2021.88/3.55/4.2.7 billion yuan (+ 30% / 23% / 20.3%).Considering that Liangxin Electric focuses on high-end low-voltage appliances and has continued growth and high dividend payout ratio, Liangxin Electric is given a 22x target P / E and target price of 9 in 2020.96 yuan, corresponding to 27/22 / 18x P / E for 2019-2021, there are 19.4% upside, the first time coverage gives the outperform industry rating.At the same time, we believe that the 2H19 performance is more stable than the 2H18 due to the photovoltaic policy, and the 1-3Q19 performance is expected to increase by 5-20%. Risk leader housing companies have completed less than expected, 5G construction has fallen short of expectations, and gross margin growth has fallen.

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