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Zhenhua Technology (000733): Doing a Good Job in Military Industry’s Steady Growth

Zhenhua Technology (000733): Doing a Good Job in Military Industry’s Steady Growth

Investment points: The market’s attention to the company lasts for the past few years. Since the new chairman took office, it has implemented the strategic development strategy of the Jiaotong Group and issued a distribution incentive plan to highlight the company’s further improved execution. The old enterprises are expected to renew their vitality.

The company is a leading enterprise in the military basic components of China Zhenhua Group.

The new chairman has rich experience in capital operation and integration of industry and finance. After taking office, he vigorously planned and implemented the reform of “addition and strengthening base + reduction and reduction of burden + multiple additions” in the context of China’s electronics transformation development strategy, focusing on the main industry of military industry,Reduce inefficient assets and promote the integration of independent and controllable resources for in vitro advantages.

Additive strong base: Relying on the first-mover advantage of “three-line construction” and the background of the military industry central 北京桑拿洗浴保健 enterprise channel, the company supplemented the raised projects to achieve product upgrades and capacity expansion, reorganized the organizational relationship of the subsidiaries to stimulate business vitality and synergies, and promoted the further consolidation of the core competitiveness of military components.

The company’s military electronics 083 base, which was built during the “three-line construction” period, has continued to develop and has a first-mover advantage. Subsequently, it has gradually established a leading position in the military component industry based on the layout and resources of China’s high-quality electronics industry.

At the end of 18, the company’s fund-raising projects may further strengthen the real business. At the same time, the synergy effect is prominent under the advancement of the integrated operation mode of the resistance and capacitance plate in the high-tech electronics field, and the main business of military components has achieved steady growth.

Subtracting and reducing burdens: The poor operating performance of individual subsidiaries is the main factor that drags down the overall profitability of the company and the expansion of performance scale. The company actively and gradually eliminates the strategic layout of extinction of alternative sources.Continuous improvement in the improvement of financial statement indicators.

Zhenhua Telecom is mainly engaged in mobile phone foundry business. In 2017, its sales gross profit margin was less than 3%, which lowered the company’s comprehensive gross profit margin. Zhenhua New Energy focused on electric vehicle battery business and gradually expanded its size to replace the company’s overall performance release.

Prior to the greater elimination measures proposed by the new chairman, the company’s revenue scale in the machine segment has been compressed, and the company may continue to reduce inefficient business revenue and reduce its scale.

Multiplying wings: The controlling shareholder has high-quality autonomous controllable component assets. As the company’s only listing platform, the possibility of playing a key role in the group’s asset securitization process will not be ruled out in the future.

China Zhenhua is the leading science and technology enterprise that lays out domestic alternatives for high-end components: Chengdu Huawei is mainly engaged in the development of FPGA, A / D and D / A chips; Centec Networks is the world’s leading SDN pioneer and core chip.Switch supplier; Zhenhua Scenery is an advanced production backbone manufacturer of semiconductor discrete devices and hybrid integrated circuits in developing countries.

China Zhenhua proposed at the 2019 working conference that it will deepen market-oriented structural reforms with the guidance of promoting industrial adjustment and upgrading and synergy, and the progress of the group’s asset integration deserves special attention.

The first coverage gives a BUY rating.

We estimate that the company’s EPS for 2018/19/20 will be 0.

48 yuan, 0.

60 yuan and 0.

76 yuan / share, currently the general (closing price on March 7) is 14.

88 yuan, the corresponding PE is 31, 25 and 20 times, which is lower than the comparable company’s estimated conversion of 33, 26 and 20 times in 18/19/20.

As a pioneer in the field of primary components, the company is advancing “additional strong base + subtraction to reduce load + multiplication to add wings”. In the future, it is expected to become a leader that leads to the realization of independent controllability of core components, giving the company 30 times the 19-year PE target, soFor the first time, a buy rating is given.

Risk reminders: the decision-making risk of the company and the group; the possibility of changes in the competition between military components; the loss of new energy lithium battery business exceeded expectations; the scale of the professional machine business contracted less than expected;