Wingtech Technology's net profit surged in the first half of the year

Wingtech Technology, the world's leading mobile phone ODM, released its 2019 semi-annual report. The company achieved revenue of 11.434 billion yuan in the first half of the year, a year-on-year increase of 110.71%; net profit attributable to shareholders of listed companies was 196 million yuan, compared with -177 million yuan in the same period last year; basic earnings per share was 0.31 yuan, compared with -0.28 yuan in the same period last year.

As for the reasons for the substantial increase in performance, Wingtech Technology stated that it was mainly due to the great success of the customer structure adjustment, the large-scale growth of the communication terminal business, and the significant increase in the number of projects and procurement on behalf of customers. It is worth noting that the above performance was achieved under the unfavorable circumstances of a substantial increase in financial expenses. In the first half of this year, Wingtech Technology's financial expenses were 208 million yuan, a year-on-year increase of 119.39%, mainly due to the reorganization and acquisition of Anshi, and the increase in interest expenses. If these expenses are added back, the net profit of the main business will be more than 350 million yuan, and the net profit of the main business for the whole year is expected to be around 1 billion yuan. The company also predicts that after deducting various interests and expenses from January to September 2019, the net profit attributable to shareholders of listed companies will be between 430 million yuan and 510 million yuan.

According to data from major global market research institutions such as IDC and Counterpoint, the overall shipments of the global mobile phone market were on a downward trend in the first and second quarters of this year. However, among the top ten mobile phone brands in the world, Chinese brands grew strongly in the first half of 2019, accounting for 42% of the market share, a record high, while international brands declined significantly. Among them, the shipments of small and medium-sized brands are still large, with shipments of 75 million units in the second quarter, accounting for 20.8% of global sales; the top three brands in terms of shipment growth in the first half of the year are all brands that introduced ODMs; Samsung is still the world's number one brand, and has a large leading advantage.

Since the beginning of this year, although the overall mobile phone industry is sluggish, industry competition has intensified, and shipments have shrunk, Wingtech Technology's scale advantages, quality level, R&D capabilities, progress control, cost control, fast delivery, and intelligent manufacturing have been fully reflected in the current environment. Wingtech Technology's high-quality, cost-effective, and fast-response competitiveness has been further highlighted, not only gaining the trust and support of old customers, but also allowing the value of ODM to be recognized by more new customers. Many brand companies that have never cooperated with ODM companies have chosen to cooperate with Wingtech Technology to jointly develop a variety of communication terminal (4G/5G) products.

According to the disclosure, in the first half of the year, Wingtech Technology planned several key projects for domestic and overseas customers in different product fields, different market regions, different functional characteristics, and different price levels. The research and development of each project progressed smoothly and reached mass production one after another. In particular, the flexible folding screen mobile phone has been released and launched globally, and the mobile PC equipped with Qualcomm Snapdragon 850 platform has also been recognized by consumers, with sales exceeding expectations.

"The position and capabilities of the industry leader are highly recognized by customers." Wingtech Technology said that the company has been recognized by most mainstream brands and has become their preferred ODM service provider, but due to the company's R&D resources and factory scale, the company can only meet part of the needs of each customer. With the expansion of the company's R&D scale and the increase in production capacity of factories around the world, it is believed that it will be able to bring more and better products to customers in the future, giving the company greater room for growth.

In addition, many global and Chinese top brand customers who have never done ODM have chosen Wingtech Technology as their first ODM supplier after a comprehensive investigation of the ODM market, and the order volume is tens of millions or even hundreds of millions. Wingtech Technology believes that this is a high recognition of the company as the industry leader. This also means that the company will transform the in-house market of at least 100 million units into the ODM market, which will greatly benefit the company and the entire ODM industry.

According to the TOP 3 ranking of smartphone shipments by ODM manufacturers in the first half of 2019 released by IHS Markit, Wingtech shipped 51 million smartphones in the first half of this year, ranking first, and the gap with Huaqin and Longcheer is gradually widening.

At the same time, Wingtech Technology is promoting major asset restructuring and plans to acquire Nexperia Semiconductor through the issuance of shares and cash payment. Currently, the acquisition has been approved by the China Securities Regulatory Commission and the relevant transactions are being actively carried out.

Nexperia is a global leader in the semiconductor standard products industry, enjoying a high reputation in the industry and ranking top in market share in many segments. Its main products are semiconductor logic chips, discrete devices, power MOS devices, etc. Its downstream partners cover the world's top manufacturers and service providers in the fields of automobiles, communications, consumer electronics, etc. Its sales network covers the world and has been widely recognized by a large customer base for many years.

Wingtech Technology stated that the acquisition is in line with the company's strategic goal of actively deploying semiconductor components, which will be beneficial to the expansion of the company's business to the upstream of the industrial chain and will have positive significance for enhancing the company's core competitiveness and sustainable profitability in the future.