Liangxin Electric (002706): Persistent R & D and innovation performance growth momentum is strong

Liangxin Electric (002706): Persistent R & D and innovation performance growth momentum is strong
Event: The company released the third quarter report of 2019, and achieved a total of 15 revenues in the first three quarters.500,000 yuan, an increase of 22 in ten years.75%; realize net profit attributable to mother 2.53 ppm, an increase of 15 in ten years.14%; net profit deducted from non-attributed mothers2.22 ppm, an 18-year increase.10%.In a single quarter, the company achieved revenue of 5 in 19Q3.60,000 yuan, an increase of 32 in ten years.06%; net profit attributable to mother is 0.98 ppm, a ten-year increase4.51%; net profit deducted from non-attribution to 0.USD 9.2 billion, an annual increase of 22.70%. Strong cash flow and stable profitability: The company achieved sales gross margin of 41 in Q3.36%, compared to epoxy 1.1 case, maintained at a relatively high level; net interest rate of 17 was achieved.52%, down 4 each year.6pcts is mainly due to the increase in related expenses such as customer development caused by the further growth of the company’s business.It is expected that the company’s product cost will be further optimized after the company ‘s intelligent low-voltage electrical appliance production base in Haiyan, Zhejiang has fully released its capacity, and the gross profit margin is expected to increase by then.In terms of cash flow, the company’s Q3 net cash flow from operating activities was zero.6.4 billion, an increase of 201 in ten years.30%, mainly due to the increase in company receivables.The company’s overall cash flow is stable, with more than 300 million currency funds in hand, which strongly supports business development. Bring into play the main effect of innovation and open up new space for development.The company reported a total of 62 patents, including 7 invention patents; zero R & D expenses.3.8 billion, an increase of 12 in ten years.72%, R & D expense ratio reaches 6.80%.Adhering to the value concept of “product reliability 70% R & D”, the company has a R 武汉夜网论坛 & D team of more than 400 people, and invests more than 6% of R & D in technological innovation each year.Whether it is a 5G dedicated 1U miniature circuit breaker or a high-voltage DC relay, the increase in the number of patent applications and innovative products fully reflects the enhancement of the company’s independent research and development and innovation capabilities, which has stabilized the company’s internal development. Customers continue to develop, and performance growth momentum is strong.The company is positioned in the mid-to-high-end S2 market and has established good cooperative relationships with leading companies in multiple industries.In the field of communications, the company has formed a close cooperative relationship with Huawei, and 1U miniature circuit breakers will benefit from the 5G trend; in the real estate field, the company terminated its cooperation with more than 100 real estate companies in mid-2019, breaking the brand monopoly position, and so on.From the trend of the industry’s demand structure to the development of the spindle, the current S2 market with a size of only 15-20 billion US dollars strives to maintain rapid growth, and the proportion of the current S2 market has been increased from 30% to 60%.At present, the company’s share in the mid-to-high-end market is only 5%. It is expected that cooperation with industry customers will continue to deepen in the future, and the revenue scale and share in the mid-to-high-end market will continue to grow rapidly. Investment suggestion: Maintain Liangxin Telecom’s Buy-A investment rating and give a target price of 10.50 RMB.We expect the company’s revenue in 2019-21 to be 20.0/22.8/26.500 million, a growth rate of 27.1% / 14.1% / 15.9%; net profit attributable to mother is 2.87/3.65/4.72 trillion, the corresponding EPS is 0.37/0.47/0.60 dollars.Taking into account the industry’s development trends, company growth, historical estimates and comparable company valuations, we maintain the company’s buy-A investment rating with a 6-month target price of 10.50 yuan, target price corresponding to 19/20 28 / 22x estimate. Risk factors: 1) Macroeconomic scale; 2) Bulk raw material prices; 3) Intensified industry competition; 4) Expansion of accounts receivable brings bad debt and bad debt losses; 5) Unsuccessful or slow pace of new product development.