CSCI-Stock Connect-Tony Electronic (603595 CH)：A champion in the making - 20180409
A champion in the making
We are optimistic about Tony Electronic’s outlook in that:
Firstly, the company has developed a vast footprint across sectors such as 3C, photovoltaics, Li-ion batteries, automobile, industry and health care through its continued success of new product launches, while maintaining low levels of selling expense rates thanks mainly to superior materials R&D capabilities, production lines automation and high-end positioning.
Secondly, a domestic diamond wires capacity of over 50mn kms by year-end 2018 still undershoots demand of 50mn-60mn kms. Hence, the current high profit margins would likely last for a quarter or two as a result of a healthy appetite for quality ultra-fine diamond wires from downstream silicon wafer manufacturers. Tony Electronic, with proprietary wire drawing techniques, automated production lines powered by foreign technologies, improved productivity and strong cost control, is well-positioned to benefit from the favorable supply-demand dynamics.
Thirdly, Tony Electronic stands the chance of expanding its conductors and laminating wires market shares on the back of Apple’s growing adoption of wireless charging and USB-C and the latest Apple Watch model’s new function to connect directly to cellular networks.
Fourthly, Tony Electronic has started batch deliveries of power battery tabs and high-pressure wire harnesses for EVs–with high barriers to market entry–bracing itself for an estimated market size of RMB2bn for battery tabs by 2020 and RMB5bn for EV wire harnesses by 2018. On top of that, it also sells medical and industrial wire harnesses to the likes of Mindray, TE Connectivity, Siemens and ABB.
Valuation and target price. We predict Tony Electronic to generate net profit of RMB460mn/630mn/720mn for 2018-2020, corresponding to EPS of RMB4.53/6.19/7.08 and 22x/16x/14x PER. Our target price of RMB135 is based on 30x PER for 2018. Initiate coverage with Buy.
Zhejiang Tony Electronic Co., Ltd. is a China-based company principally engaged in the application, research, development, manufacture and sales of ultra-fine alloy wire products and other metal matrix composite materials. The Company's main products include ultra-fine conductor, laminating wire, diamond cutting wire, wireless induction coils, cutting steel wire and others. The ultra-fine conductor and laminating wire are mainly used in consumer electronic, new energy vehicle, medical equipment and intelligent robot and other fields. The diamond cutting wire is mainly used for cutting silicon and sapphire and other materials. The Company is also engaged in the sales of raw materials and used consumables.
中信建投国际研究部是中信建投证券香港子公司中信建投国际下属研究部门，负责香港上市公司、行业和宏观研究。我们的研究产品和服务包括行业报告、公司、宏观、常规日报、新闻摘要、分析员路演、上市公司非交易路演和反向路演 以及策略会。
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.