As the key to promoting the upgrading and transformation of manufacturing from low-end to mid-to-high-end, the importance of industrial automation equipment is becoming increasingly prominent. In recent years, under the dual pressure of developed foreign countries controlling key technologies and the lack of competitiveness of domestic manufacturers, my country has continuously introduced support policies, increased investment in automated equipment manufacturing, encouraged enterprises to innovate independently, promote technological industrialization, and accelerated the domestic production process of automated equipment.
With the advancement of policies and technological innovation, the market size of the domestic industrial automation equipment manufacturing industry has continued to expand, and the trend of import substitution is becoming more and more obvious. According to the "2019 China Automation and Intelligent Manufacturing Market White Paper" and MIR Databank data collection, from 2004 to 2019, the market size of my country's automation industry increased from 106 billion yuan to 186.5 billion yuan, corresponding to a compound growth rate of more than 7%.
Zhitong Finance APP noticed that, with the continuous and steady development of the market, a number of "later waves" have emerged in the industry. Taking Zhilifang, which passed the review a few days ago as an example, the company is a high-tech enterprise focusing on the research and development, production, sales and related technical services of industrial automation equipment. Its products include industrial automation equipment, automation equipment accessories and related technical services.
In terms of downstream applications, Zhicun's products are mainly used in the optical, electrical, mechanics and other functional testing links of customer products in consumer electronics, electronic cigarettes, industrial electronics, automotive electronics, semiconductors and other fields, as well as the product assembly link.
It is worth mentioning that Zhilifang is also the core supplier of automated testing equipment in the optical recognition and optical sensing segment of Apple (AAPL.US). From 2018 to the first half of 2021, Zhili's direct and indirect order revenue to Apple was 82.61%, 75.83%, 68.82% and 74.51% respectively. It is not difficult to see from the revenue share that the terminal application fields of Zhilifang products are mainly concentrated in the consumer electronics field, which is mainly Apple.
As another Apple chain company, how is Zhilifang's business situation? If the company successfully lists on the GEM in the future, how should we view the company's development prospects?
performance is highly dependent on Apple's
's performance, in recent years, Zhicun's overall revenue and net profit data have both maintained a growth trend. On the revenue side, from 2018 to the first half of 2021, the company's revenue was RMB 285 million, RMB 282 million, RMB 353 million and RMB 267 million, respectively, and the net profit in the same period was RMB 58.8448 million, RMB 66.8202 million, RMB 93.2986 million and RMB 56.3838 million respectively.
Subdivided income structure, Zhicun's revenue sources include three major parts: industrial automation equipment, equipment accessories and technical services. Among them, industrial automation equipment is the company's largest source of income, bringing revenue of 250 million yuan, 223 million yuan, 284 million yuan and 237 million yuan respectively during the period, accounting for 87.77%, 79.17%, 80.42%, and 88.88% of the total revenue.
Judging from the trend of revenue, it can be seen that the company's industrial automation equipment business revenue in 2019 decreased significantly compared with the previous year. It is reported that at that time, the new automated testing equipment sold by Zhilifang was mainly used to test wearable devices. Due to the differences in terminal products, the unit price of the equipment decreased compared with the previous year; at the same time, affected by the differences in production process and product sales, customer orders were characterized by a small number of multiple batches. The combined two factors led to the company's revenue of automation testing equipment that year was only 197 million yuan, a significant decrease from 219 million yuan in 2018. Affected by the above factors, Zhicun's overall revenue showed negative growth in 2019.
During the same period, Zhicun's equipment accessories and technical services accounted for a small proportion. In terms of equipment and accessories, the revenues achieved 10.0646 million yuan, 22.7875 million yuan, 33.4227 million yuan, and 5.2814 million yuan during the period, accounting for 3.53%, 8.08%, 9.46%, and 1.98% of the revenue; the revenues achieved 24.8116 million yuan, 35.9602 million yuan, 35.784 million yuan, and 24.3586 million yuan.
profit side, as mentioned earlier, the company's net profit increased year by year. But in terms of profitability, Zhicun's gross profit margin level is actually not stable. During the period, the gross profit margins of the company's main business were 37.77%, 53.45%, 51.1% and 41.09%, respectively. It can be seen that 2019 was the stage high and has continued to decline after that.
According to the disclosure, the decline in the overall gross profit margin of Zhicun during the period was mainly due to the decline in gross profit margin of optical testing equipment, which led to the decline in gross profit margin of new automation equipment. It should be pointed out that the company's new automation equipment is a non-standard customized product and has the characteristics of being highly customized. The gross profit margin of the product is easily affected by external factors such as downstream customers' functional requirements for specific equipment products, comprehensive technical content, terminal product iteration, delivery time, and market competition environment. Based on this, Zhitong Finance APP expects that the company's gross profit margin volatility may remain strong for a long time in the future.
In addition, looking at the performance of Zhicun, one of the outstanding features is that the company's performance is highly dependent on Apple. During the period, the proportion of the company's sales revenue to Apple accounted for 75.58%, 32.94%, 34.93% and 51.84% of the current revenue, respectively; during the same period, the company's direct and indirect order revenue to Apple also accounted for 82.61%, 75.83%, 68.82% and 74.51% of the company's direct and indirect order revenue to Apple was also 82.61%, 75.83%, 68.82% and 74.51% respectively. Although both sets of data have a slight downward trend, the proportion is still at a high level.
Zhitong Finance APP believes that severe reliance on large customers Apple may leave hidden concerns for the company's subsequent business development. As we all know, there are many brands in the consumer electronics field and fierce competition. It also has the characteristics of fast product iteration and rapid changes in customer demand. In the future, once the company's products cannot meet the needs of large customers, or Apple's competitiveness in the consumer electronics field declines, we can imagine that Zhicun's performance will be tested.
In addition, since Zhicun's performance is highly dependent on Apple, this has also caused the problems of weak bargaining power and high accounts receivable to a certain extent. During the period, the book value of Zhili's receivables was RMB 88.3918 million, RMB 103 million, RMB 69.4664 million and RMB 155 million, accounting for 58.5%, 67.37%, 29.52%, and 41.5% of current assets at the end of the period, respectively, and accounting for 30.99%, 36.43%, 19.65% and 58.18% of current revenue, respectively.
Growth space may be limited
For A-share technology stock investors, growth ability is often an important reference for measuring the long-term investment value of a company. Although Zhicun's core financial data has performed well in the past few years and has shown a certain degree of growth, the company's growth ceiling height may be very limited in terms of a longer time dimension.
mentioned earlier that Zhicun's performance relies more on Apple. If the scope is expanded, the company's sales to the top five customers will reach 90.71%, 86.86%, 89.49% and 84.95% during the period. Compared with its peers, Zhili's customer concentration is "unique". According to the disclosure, from 2018 to 2020, the average sales share of the top five comparable companies in the same industry was 63.3%, 59.83%, and 56%.
It is particularly worth mentioning that among the top five customers of Zhicun during the period, Goertek, Hon Hai Group, Luxshare Precision, Zhishen Technology, Jabil Group, Quanta Group, and Pegatron Group are all suppliers of Apple. The only two non-Apple chain companies are Juul Labs, Inc. and Smoore International, which are e-cigarette companies in the United States and China respectively.
It is true that Zhilifang is highly bound to the Apple chain, which is an excellent path for the company to achieve continuous growth in the early stages of its development. Judging from the performance in recent years, holding Apple's thighs has indeed made the company taste the "sweetness". From 2018 to 2020, the company's on-hand order amounts from Apple's business reached RMB 34.9291 million, RMB 51.2267 million and RMB 58.4799 million, respectively, with an average annual compound growth rate of 29.39%; as of the end of June 2021, the on-hand order amounts from Apple's business were RMB 142 million, and the growth trend continued.
However, in the view of Zhitong Finance APP, the disadvantages of focusing on business expansion of a single application field and core customers are also very obvious. On the one hand, due to the limitations of Apple's own growth rate and Apple's demand for automation equipment, it is probably not easy for Zhili to grow stably and continuously by holding Apple's thighs; on the other hand, since becoming Apple's supplier in 2014, the company's focus has always been on the consumer electronics field, which is mainly Apple, which has also led to the company's lack of technical accumulation and production experience in other industries. It is not difficult for the company to develop new markets in the future.
According to the prospectus, since 2018, Zhili has developed customers in the electronic cigarette industry such as Juul Labs, Inc., and has also further expanded and developed customers in the industrial electronics and semiconductor industry such as Carnival Corporation & plc, Perfectools, and Gaoshi Technology. During the period, the company's non-consumer electronics industry revenue was RMB 8.6064 million, RMB 10.4271 million, RMB 23.7081 million and RMB 38.3665 million, respectively, showing an upward trend year by year, but the proportion is still less than 15%.
Judging from the content disclosed in the prospectus, Zhilifang itself is also willing to cultivate new growth poles outside the Apple chain. It is understood that the company will focus on allocating strategic resources to the e-cigarette and semiconductor industries in the future. Part of the funds raised by the company's listing will be used for the "R&D center upgrade project", and this project is mainly aimed at the aforementioned two markets with high growth prospects.
However, as mentioned above, Zhicun's current business scale in the field of automation equipment application in electronic cigarettes, industrial electronics, automotive electronics, semiconductors and other industries is still small, and the subsequent development status remains to be seen. Looking ahead to the future market, even if Zhili successfully lands on the GEM, if the company cannot successfully cultivate new performance growth points on the basis of consolidating the existing Apple chain business, then the company's market prospects and growth expectations may be limited, which may suppress the company's long-term valuation level.
