Counting the mobile phone concept stocks that have been "abandoned" by the market: deeply tied to Huawei

According to Jiwei.com's observation, among the electronic industry companies that implemented private placement in the past year, the stocks whose latest closing prices fell below the issue price by a large margin mainly include China National Petroleum Technology, Dongshan Precision, Beijing Junzheng, Feirongda, etc. The decline of the above-mentioned stocks compared with the issue price exceeded 30%, especially Feirongda, which had the highest discount, with a drop of nearly 40%.

It is understood that Feirongda's additional issue price was 42.01 yuan per share, and its stock price has been falling since February 2020, from the highest price of 40.96 yuan on February 28, 2020 to the lowest price of 15.47 yuan on February 26, 2021, a drop of 62.23%.

However, judging from its overall performance in recent years, its performance has been growing steadily until the first half of 2020. However, the third quarter of 2020 became a turning point, with revenue growth almost stagnating and net profit almost halved. In this regard, industry insiders pointed out that the mismatch between stock prices and performance in the early 2020 should be related to the fact that Feirongda was too deeply tied to Huawei. With the decline in Huawei's mobile phone sales, the confidence of the secondary market has also been gradually eliminated.

In addition, perhaps for the sake of "showy" accounts, Feirongda has successively acquired a number of companies since 2019, so that its revenue in 2020 will continue to grow as usual. However, no matter how impressive the financial report is, it cannot offset the negative impact of market changes. If it fails to acquire new customers as soon as possible, not only will its performance growth be unknown, but the stock price trend may still be not optimistic.

With the help of Huawei, Flyonda's performance has increased more than sixfold in seven years

It is reported that Flyonda was established in 1993 and listed on the Shenzhen Stock Exchange Growth Enterprise Market on January 26, 2017. It is mainly engaged in the research, production, sales and design of electromagnetic shielding materials and devices, thermal conductive materials and devices, base station antennas and related devices, and protective functional devices. In recent years, its business has evolved from the production of electronic auxiliary materials to the application development stage of electromagnetic shielding and thermal conductive products, and from independent research and development and production of electromagnetic shielding materials to the current electromagnetic shielding and thermal conductive application solution provider.

At present, its communication customers include Huawei, ZTE, Nokia, Ericsson, Hongxin Communication, etc. Its network communication customers include Microsoft, Cisco, Facebook and Google, etc. Its terminal customers include Huawei, Samsung, Xiaomi, Microsoft and Lenovo, etc. Its automotive customers include GAC, BAIC, CRRC, FAW Bestune, FAW Hongqi, Dongfeng Nissan, CATL, Shenzhen VMAX, Guoxuan and Farasis, etc. Its other customers include Growatt, Bern Optical, Sungrow Power Supply, etc.

From the perspective of customers, combined with its reply on the interactive platform that "Huawei's revenue accounts for about 20% of the company's total revenue." Therefore, it can be speculated that Huawei is its largest customer. From 2013 to 2019, its sales to its largest customer were 81 million yuan, 120 million yuan, 178 million yuan, 200 million yuan, 197 million yuan, 312 million yuan, and 712 million yuan, accounting for 17.74%, 19.90%, 27.62%, 23.69%, 19.02%, 23.54%, and 27.22% of its revenue, respectively. The proportion has been rising year by year, and the sales revenue to Huawei in 2019 exceeded twice that of the previous year, which is in line with the doubling of its revenue and net profit that year.

Due to strong demand for smartphone terminals and the increase in mobile phone shipments of major customers, Feirongda's performance continued to grow steadily from 2013 to 2019, with operating income increasing from 459 million yuan to 2.615 billion yuan, an increase of nearly 6 times, with an increase ranging from 6.81% to 97%.

The corresponding net profit increased from RMB 50 million in 2013 to RMB 351 million in 2019, a 7-fold increase, with the largest year-on-year increase reaching 115.90%. However, the growth rate declined in 2017, which was explained by the fact that there were many new products developed in the mobile terminal project at the beginning of the year, some new projects were delayed in mass production, and project development and management costs increased.

At the same time, it can be found that the year with the fastest performance growth was 2019, when both revenue and net profit almost doubled. In that year, with the advent of large-scale deployment of 5G, the revenue of its base station antennas and related devices soared by 515% year-on-year, and the introduction of new mobile phone customers and the share of major customers increased. In addition, the acquisition of many companies has been completed and included in the scope of consolidated statements, which has played a positive role in the current performance.

In recent years, it has continued to strengthen the electromagnetic shielding and heat dissipation layout of communication base stations, terminal electronics, and new energy vehicles through external mergers and acquisitions and investments in subsidiaries. Specifically, since 2018, through the acquisition of Bowei Communications, it has improved its antenna design, research and development, and testing capabilities, and expanded its business in the field of communication antennas, opening up the upstream and downstream industrial chain of antennas; through the acquisition of Runxingtai, it has improved the antenna-end product supporting, strengthened the layout of semi-solid die-casting technology, and completed the overall layout of the overall solution for heat dissipation of new base stations; the acquisition of Kunshan Pindai and Jiangsu Zhongdi can form a synergistic effect with its thermal conductive materials business, effectively reduce costs, and form an industrial chain layout from upstream materials to downstream modules. The synergistic effect after the merger and acquisition is becoming increasingly prominent.

Mobile phone revenue fell by 40% in Q3 2020, and net profit was nearly halved

In May 2020, in the non-public offering of shares, Flyonda pointed out that the number of shares issued in this non-public offering was 16.6627 million shares, and the issue price was 42.01 yuan per share. It also plans to raise 700 million yuan to invest in the 5G communication device industrialization project and supplement working capital. After the project is implemented, it will mainly produce 5G antenna covers, antenna oscillators, and high-performance structural parts for communication equipment such as switches and routers.

However, as of March 31, 2021, its share price was 16.23 yuan, far below the issue price, and the share price has been falling since February 2020. However, contrary to the stock price trend, from the financial reports of each period in 2020, Feirongda's performance is still good, and its revenue continues to grow, with the largest increase reaching more than 60%. However, the third quarter of 2020 became a turning point, with its revenue growth almost stagnant and its net profit almost halved, achieving revenue of 768 million yuan, a year-on-year increase of 0.41%; net profit attributable to the parent company was 52.7524 million yuan, a year-on-year decrease of 49.06%.

In addition, in the first three quarters of 2020, its revenue was 2.241 billion yuan, a year-on-year increase of 33.80%; the net profit attributable to shareholders of the listed company was 223 million yuan, a year-on-year decrease of 13.88%.

According to it, the growth in performance in the first half of 2020 was mainly due to the revenue growth and expansion of business scale brought about by the integration of the industrial chain in 2019 and the merger of Guangdong Bowei Communications, Kunshan Pindai, Zhuhai Runxingtai and Jiangsu Zhongdi.

However, in the third quarter, its mobile phone business was restricted by the chips of its main customer, Company H, which caused its operating income in the mobile phone field to decline by about 41% year-on-year. In response, Flyonda said that it is actively exploring new customers. In the third quarter, it has entered the supplier certification stage of multiple brand mobile phone manufacturers, and has provided mobile phone VC, heat pipe and wireless charging related samples to multiple projects, entering the customer product testing stage.

However, for mobile phone manufacturers, especially large brand manufacturers, the supplier inspection and review process requires a long period of time, high certification standards, strict certification conditions, long product testing cycle and high certification costs, which cannot be achieved in the short term.

On the other hand, from the perspective of sales expense ratio, although the sales amount has been increasing year by year, the increase is extremely limited, from 17 million yuan in 2013 to 80 million yuan in 2019, an increase of only 63 million yuan. The performance of sales expense ratio is more intuitive, almost around 3.5% for seven years, and only exceeded 4% in 2016. The revenue growth and stagnation of sales expense ratio also reflect from the side that Feirongda, which is deeply bound to major customers such as Huawei, still needs to strengthen the development of new customers.

So far, with Huawei's sales declining and operating conditions fluctuating, the reason why Feirongda's performance "seems" not to have been greatly affected and not to have declined significantly is mainly due to the revenue growth brought about by corporate mergers and acquisitions. However, the impact of Huawei has already appeared in the third quarter, not only causing its net profit to drop sharply by 49% year-on-year, but also causing its mobile phone business revenue to drop by more than 40% year-on-year. With Huawei's orders continuing to shrink, if it fails to find new customers to "replace" in time, can Feirongda's future performance continue to grow, and can its stock price stop falling and rise again?