20220127-招银国际-生益科技-600183.SH-Weaker_4Q21_with_limited_pricing_upside_in_2022；D_G_to_HOLD_4页_1mb

Shengyi Technology (600183 CH) Summary

Core Content

Shengyi Technology (600183 CH) is a company that has been reviewed in a CMB International Securities (CMBIS) equity research update. The report highlights the company's performance in FY21 and outlook for FY22, along with financial metrics and valuation adjustments.

Main Points

• FY21 Performance:
  Shengyi Technology reported strong FY21 preliminary results, with net profit expected to grow by 56-73% YoY to RMB2.62bn-RMB2.90bn.
  However, 4Q21 net profit declined significantly, with a mid-point of RMB421mn, representing +11% YoY growth but -55% QoQ decline.
  The company's results were slightly below consensus and the analysts' previous forecasts, leading to a downgrade to HOLD.

• Valuation Adjustments:
  The target price (TP) was adjusted to RMB23.50, based on a 19x FY22E P/E ratio, down from the previous 22.5x.
  The current price is RMB20.56, which is 14.3% below the new TP.
  The TP reflects slower earnings growth in FY22/23E and limited upside in CCL ASP (average selling price).

• Growth Outlook:
  The company is expected to see slower growth in FY22 and FY23 due to a high base in FY21 and macroeconomic uncertainty.
  The auto PCB segment is a bright spot, accounting for ~25% of total revenue, with clients including both traditional and EV auto companies.
  The auto segment is anticipated to continue growing in 2022 due to the robust EV market and ongoing electrification trends.

• Material Cost Pressure:
  Copper prices have risen significantly over the past year, with a 50% YoY increase based on average daily close prices.
  The company has faced challenges in transferring this cost pressure to downstream clients, which has impacted its gross margin (GPM).

• Financial Highlights:

  • Revenue Growth: 10.5% in FY19A, 10.9% in FY20A, 35.8% in FY21E, 9.3% in FY22E, and 11.2% in FY23E.
  • Gross Margin: Maintained relatively stable at 26.6% to 26.9% over the years, but showed a slight decline in FY22E to 26.5%.
  • Net Profit: Expected to grow from RMB1,449mn in FY19A to RMB3,236mn in FY23E.
  • EPS: RMB0.66 in FY19A, RMB0.74 in FY20A, RMB1.19 in FY21E, RMB1.23 in FY22E, and RMB1.38 in FY23E.
  • P/E Ratio: RMB17.3x for FY21E, RMB16.8x for FY22E, and RMB14.9x for FY23E.
  • P/B Ratio: RMB3.6x for FY21E, RMB3.2x for FY22E, and RMB2.9x for FY23E.

• Risk and Upside Factors:

  • Upsides: Continued transfer of material cost pressure to clients and higher-than-expected market demand.
  • Risks: Less-than-expected transfer of material costs and weaker market demand.

Key Information

• Analysts: Lily Yang, Ph.D., Alex Ng, Lana Lin
• Contact:
  Lily Yang: (852) 3916 3716 / lilyyang@cmbi.com.hk
  Alex Ng: (852) 3900 0881 / alexng@cmbi.com.hk
  Lana Lin: (852) 3761 8912 / lanalin@cmbi.com.hk
• Market Cap: RMB47,526mn
• Share Performance:
  • 1-month: -8.2%
  • 3-month: -6.2%
  • 6-month: -9.6%
• Shareholding Structure:
  • Guangdong Guangxin Holdings: 24.76%
  • Dongguan Guohong Invest.: 13.89%
  • Weihua Electronics: 12.76%
• Earnings Revisions:
  • FY21E: -9% change in EPS
  • FY22E: -9% change in EPS
  • FY23E: -8% change in EPS
• Key Ratios:
  • Revenue mix: CCL (76%), PCB (23%), Others (1%)
  • Gross margin: 26.6% to 26.9%
  • Operating margin: 13.6% to 16.8%
  • Net profit margin: 10.9% to 13.8%
  • ROE: 16.4% to 21.0%
  • ROA: 9.3% to 11.4%
• CMBIS Ratings:
  • HOLD: Potential return of +15% to -10% over next 12 months
  • OUTPERFORM: Industry expected to outperform the market
  • MARKET-PERFORM: Industry expected to perform in-line with the market
  • UNDERPERFORM: Industry expected to underperform the market

Summary Table

Conclusion

Shengyi Technology's FY21 results were robust, but 4Q21 showed a significant decline in net profit. The company's outlook for FY22 is cautious due to macroeconomic uncertainty and limited pricing upside. Despite these challenges, the auto PCB segment remains a key growth driver. The company's valuation has been adjusted downward, with a new target price of RMB23.50, and the rating has been downgraded to HOLD. The financial performance and key ratios indicate a stable gross margin and improving operating and net margins, though the company faces risks related to material cost transfer and market demand.