Interpretation of Luxshare Precision's 2020 annual financial report: revenue increased by 48%, net profit increased by 53%

According to Jiwei.com, after Apple concept stocks experienced a "limit-up surge" in the previous two days, the share price of Luxshare Precision, the leader of Apple concept stocks, fell in the morning of April 21. However, as of the close, Luxshare Precision's share price rose 2.58% that day.

On the evening of April 20, Luxshare Precision disclosed its 2020 annual performance report. Data showed that its operating income was 92.501 billion yuan, a year-on-year increase of 47.96%; net profit attributable to shareholders of listed companies was about 7.225 billion yuan, a year-on-year increase of 53.28%; basic earnings per share was 1.03 yuan, a year-on-year increase of 51.47%.

It is reported that Luxshare Precision's products and business layout are characterized by diversification and vertical integration, covering components, modules and system assembly. The main processes of the precision components business include complete production process capabilities such as precision mold design and processing, intelligent automation design and implementation, CNC, SMT, SiP, stamping, molding, electroplating, conductor extraction, and bare wire extrusion. Module products focus on functional areas such as acoustics, radio frequency, touch, and power supply, mainly including acoustic modules, antennas, wireless charging, vibration motors, etc. In addition, in the field of communications and data centers, it deeply covers products including high-speed interconnect, optical modules, heat dissipation modules, base station antennas, base station filters, etc.

In the automotive field, it focuses on the "vascular and nervous system" of the entire vehicle. Specific products include vehicle wiring harnesses, special wiring harnesses, high-voltage wiring harnesses and connectors for new energy vehicles, smart electrical boxes, RSUs (roadside units), vehicle communication units (TCUs) and central gateways.

Whether it is the communications or automotive business, both have benefited from the strong comprehensive capabilities of process, R&D, quality and business accumulated by Luxshare Precision in the consumer electronics field in the early days. The relevant mature experience and various resources have generated full synergy between different fields. The company follows future needs, especially in the fields of acoustics, vision, power supply (wired/wireless), wireless communication technology, etc., and related products are widely used in various consumer electronics and automotive businesses. In recent years, the supply chain has been continuously reconstructed in the field of system assembly business, and the main products include smart wearables, smart homes, smart displays, etc.

From the perspective of application areas, consumer electronics, communications, and automobiles constitute Luxshare Precision's main products and business modules. The main consumer electronics terminal products include acoustic TWS headphones, head-mounted Bluetooth headphones, high-end gaming headphones, small high-quality stereo speakers, smart life 5G routers, Wifi 6 portable routers, smart terminal wearable watches and bracelets, tracking locators, game controllers, AR/VR, computer accessories Dock expansion docks, smart styluses, and wired and wireless charging accessories for various retail PC/NB/mobile phone brands. In addition to traditional products, the company will also collaborate with customers on different platforms to launch a variety of customized smart products to enrich its product line portfolio.

In the communications business, its product layout in communications hardware has also been continuously extended horizontally. Currently, complete machine products include base station antennas, base station filters, tower-mounted amplifiers, duplexers, combiners, RRUs, AAUs, small base stations and others; core components mainly include high-speed connectors, high-speed cable assemblies, optoelectronic conversion and optical transmission application products, heat dissipation modules, transmission modules, RCUs and others. Through the above product layout, its dual-line development route of complete machine + core components (electrical connectors/optical connectors/thermal management) has begun to show results.

In terms of the automotive business, Luxshare Precision has become a supplier that integrates the design, manufacture and verification of complete vehicle wiring harnesses, special wiring harnesses and intelligent electrical boxes through vertical integration. At present, it has designed and developed all high-voltage wiring harnesses and connectors in the whole vehicle, including high-voltage wiring harnesses, charging connectors, high-voltage connectors, busbars and other product series.

In addition, the Gigabit Ethernet connector independently developed and produced by it adopts a fully shielded twisted pair cable connection structure, which can be widely used in infotainment, ADAS, domain controllers and other products. It is also committed to wireless communications and automotive electronic products, and its current product line has covered RSU, TCU and CGW.

In terms of market capacity, in 2020, the market capacity of Luxshare Precision's consumer electronics business was 469.64 billion yuan, the communications business was 139.64 billion yuan, and the automotive business was 100.61 billion yuan, with a cumulative market capacity of 709.90 billion yuan.

From the perspective of R&D, in the past three years, Luxshare Precision has invested a total of 12.636 billion yuan in R&D, of which 5.745 billion yuan was invested in R&D in 2020, accounting for 6.21% of its operating income. It is mainly divided into initial investment and product iteration investment. Initial investment mainly revolves around the company's medium- and long-term product and business planning layout, covering the company's investment in new products and new fields in the future and related investment in underlying technology research, accounting for about 30% of the company's overall R&D expenses; product iteration investment is the R&D investment in the process from concept to NPI (new product introduction) of new solutions and new products.

From the perspective of customers, the total sales amount of Luxshare Precision's top five customers in 2020 was 75.879 billion yuan, accounting for 82.03% of the annual total sales. Among them, the total sales to the largest customer accounted for 69.02%, far higher than the revenue share of other major customers.

In terms of investment and mergers and acquisitions, Luxshare Precision newly established subsidiaries and grandson companies in this period are Suzhou Liantao Electronics Co., Ltd., Luxshare Precision Industry (Jiangsu) Co., Ltd., Xingning Luxshare Electronics Co., Ltd., Luxshare Liantao (India) Co., Ltd., Changshu Luxshare Industrial Investment Management Co., Ltd., Kunshan Luxshare Enterprise Management Development Co., Ltd., Kunshan Luxshare Enterprise Management Services Partnership (Limited Partnership), Luxshare Intelligent Equipment (Kunshan) Co., Ltd., and Luxshare Intelligent Manufacturing Technology (Rugao) Co., Ltd., and acquired Cyber ​​Acoustics, LLC (USA) and Taiqiao Investment Co., Ltd., adding eleven new companies to the scope of consolidation; in addition, it transferred its original equity in Luxshare Precision Industry (Xi'an) Co., Ltd. in this period, so it is no longer included in the scope of consolidation in this period.

In the next few years, the consumer electronics business will continue to occupy an important position in Luxshare Precision. From components, modules to systems, the company will continue to implement and deepen the concept of vertical integration. In the field of communication interconnection, the company will continue to adhere to the integrated strategic principle of "application, development, and pre-research" and continue to maintain a high degree of stickiness to the market and cutting-edge technologies.

For the communication RF business, the company will focus on the product strategic planning of "core components + modules + systems", continue to increase investment in design and research and development, enhance the ability to manufacture core components, and continuously improve internal operational efficiency through digital transformation and upgrading; in the face of business opportunities in the automotive field under the "new four modernizations", the company will continue to maintain a high level of attention and appropriate layout, continue to apply its deep accumulation in the fields of consumer electronics and communication interconnection, and reduce the dimension of mature precision manufacturing experience and development capabilities for solving communication-level high-speed transmission to the automotive business, and differentiate the intelligent and convenient wireless power technology of consumer electronic products in the automotive business. At the same time, it will deploy medium/high-power automotive wireless charging module technology to seize the development opportunities of power liberalization in the future autonomous driving market.