Desay Battery - the leader in small mobile power management systems

We recently conducted a survey of Desay Battery and had in-depth communication with the company's senior executives. The company's basic situation is as follows:

Third quarter report

The company announced its 2011 third quarter report on October 28, 2011. During the reporting period, the company's total operating revenue was 1.317 billion yuan, a year-on-year increase of 59.77%; operating profit was 113 million yuan, a year-on-year increase of 54.66%; net profit attributable to shareholders of listed companies was 60.53 million yuan, a year-on-year increase of 51.31%, and earnings per share was 0.44 yuan.

Secondary battery professional manufacturer

Secondary batteries include four parts: battery cells, power management systems, packaging, and chargers. The company is involved in the first three areas, corresponding to three holding subsidiaries: Juneng, Lanwei, and Huizhou Battery. Currently, the company's profits come from the power management system and packaging business. Juneng's polymer lithium battery cell business has not yet turned a profit, and its products are also low-end.

Leader in small mobile power management systems

The company is the first in China in terms of small mobile power management systems. It supplies ATL, Sony and other world-class battery manufacturers, indirectly enters the Apple industry chain, and becomes a first-tier supplier with a fairly high share. Since the power management system in high-end smartphones has added a power detection chip, the unit price of the product has been greatly increased (the original unit price of the small power protection board was 2-3 yuan, and it can reach more than 10 yuan after adding the power detection chip). The increase in unit price and the increase in shipments of brand customers have led to a significant increase in the company's revenue. The company is positioned as a high-end smartphone, and the future growth of this business will mainly come from the growth in shipments of iPhone and other high-end brands (Samsung, NOKIA).

High growth rate is expected for medium and large mobile power management systems

The company's medium-sized mobile power management system is mainly aimed at the power tool market. The company's current first-line customers include Bosch and Bosch. The company has made some achievements in multi-parallel power management and environmental monitoring. The certification threshold for large-scale mobile power management systems is high. The company entered this field by investing in Yineng. At present, due to the postponement of major customer projects and the government's investment not meeting expectations, the growth is lower than expected. The policy situation needs to be observed in the future. From small to medium and large mobile power management systems, the technical difficulty gradually increases. At present, the company's base in the medium and large fields is still very low and is in the incubation period. The future growth rate can be expected.

In the field of battery cell packaging, a certain growth rate is maintained

Packaging is a relatively easy link in secondary battery technology, located in the middle of the smile curve, and its profit level has been declining in the past. However, with the launch of high-end smartphones such as the iPhone, packaging has become more complex, the life cycle of mobile phones has become longer (generally one year for iPhones), and the shipment volume of a single mobile phone has also increased, and the profit level of automated packaging has rebounded. It is expected that with the increase in iPhone shipments in the future, this business can maintain a certain growth, but the profit margin may be squeezed again.

Profit forecast and investment advice

As a leader in small mobile management systems, the company is positioned in high-end smartphones. The high share in the iPhone supply system supports the growth in the next two years. However, as the penetration rate of high-end smartphones reaches the second inflection point, the growth rate will slow down. Medium and large power management systems are still in the incubation period, and we expect breakthroughs in the future to become a new growth point. In the short term, the sharp increase in tax rates and expense rates has suppressed the growth rate of net profit, but this impact will be eliminated next year. The company is given a profit forecast of 0.56, 0.82 and 1.17 yuan in 2011-2013, and a "recommended" rating.

Risk Warning

Customer concentration is too high; as a state-controlled company, there may be mechanism problems that lead to insufficient motivation among management.