Davis double-click effect points out: has a cycle from double high to double low, investors who like growth stocks should pay attention to the emergence of this negative cycle. Typical changes are the company entering a mature or recession period, and the market entering a bear market, and the market expectation value decreases. Once a company moves to a mature market, expectations decline, typical performance can be that profits double within a few years and the stock price does not rise. This is a lot of things, and it also makes many people puzzled. This situation is not bad. The worst possible is that the company's revenue and profits will decline or be unstable. So if the profits drop by half, the EPS drops from 2 yuan to 1 yuan, the market expectation can quickly return, and the PE will be from 60 to 10, then the shareholders' losses will be very large. Then the previous example is reversed, that is, the stock price can fall to one-twelveth of the original.
to achieve Davis double-click first, you must have certain growth potential and predictable industries.
Here is a case discussion: Taijing Technology 603738 for a general analysis.
The company is located in: Electronic components
Specific products: crystal resonator
Expectation: 5G product demand grows exponentially
The company's current technology core
The company has successively developed and utilized key technologies such as ion etching and vacuum wheel welding of high-frequency SMD micro products, and expanded its application to micro-chip tuning fork crystals. has become one of the few companies in the world that can produce this product, realizing mass production of SMD micro products in all domains, becoming the company's new growth point , and gradually becoming a strong competitor in the field of micro-SMD high-frequency crystal resonator products. According to public information, by the end of 2017, the company has developed into a top enterprise in mainland my country with production capacity and production and sales. In terms of micro SMD high-frequency crystal resonators, the company has introduced the latest production equipment, and the yield rate of of this product reaches more than 95% , which has obvious cost advantages.
According to the data given by the company, SMD products decreased by 3 percentage points in 2018 compared with 2017, but according to the reports given by the company, the production and sales volume of the product both increased by more than 36%, indicating that the product price competition is fierce and the price drops rapidly.
Company’s R&D investment
Company’s R&D expenses 20.2022 million yuan, accounting for 3.30% of operating income. The data of is obviously low for a technology company. Perhaps the company's products themselves are not technically high, so the company's gross profit margin is at 30%, gross profit margin was 28% in 2017, and gross profit margin fell to 24% in 2018. Where is the ceiling of
in the industry?
In 2018, the first-level index of CITIC Electronic Components Industry fell 41.3%, ranking second to last among all 29 first-level industry indexes, only slightly better than the comprehensive industry index. According to the first-level industry index of Shenwan , the first-level industry index of electronic components ranked last, with a chilly wind that made people tremble.
This also caused the stock price performance of companies in the electronic components industry in 2018 the worst in the whole year.
Electronic components weekly average dynamics in the past three years
This way, if the electronic components industry can expect in the future, then the current situation may be to achieve a better opportunity to build a position with Davis double-click.
But each company needs to treat it differently. first read Taijing Technology 2018 annual report related content .
Products:
Company is mainly engaged in the research, development, production and sales of quartz crystal resonators, and belongs to the quartz crystal components sub-industry in the electronic components industry. It is mainly used in computer and mobile phone terminals, various electronic digital products, network equipment such as large base stations and routers, various smart meters and electronic tags, including wireless wide area network, local area network, metropolitan area network and personal network, and 3g4g5g and many other aspects.
According to statistics from the Ministry of Industry and Information Technology, in 2018, the revenue of IoT business increased significantly by 72.9% over the previous year. (Data source: "2018 Communications Industry Statistics Bulletin" of the Ministry of Industry and Information Technology).
During the 13th Five-Year Plan period, the Internet of Things industry will usher in a new round of rapid structural upgrades and product updates. will help promote the growth of the domestic consumer market scale and enable the demand for various types of crystal resonators to grow steadily.
However:
Due to the release of production capacity of early fixed asset investment, the competitiveness of various enterprises has been continuously improved, and the competition in the domestic substitute electronic components market is becoming increasingly fierce, and crystal products are no exception. During the reporting period, the market situation of the company's main business products was improving, but the market competition was fierce, product prices fell significantly, and corporate profitability faced challenges.
From the chart, it can be seen that my country's quartz crystal components industry accounts for nearly 10% of the world in 2017, and its overall scale is small. This provides market confidence for domestic enterprises to replace domestically, and has also caused many places in China to put into production and start projects.
The overall market sales of mainland Chinese manufacturers are lower than those of Japan and Taiwan, but the growth rate is higher than that of the world. In 2017, sales accounted for about 10.10% of the world, an increase of nearly 6.1 percentage points from 4.0% in 2010. With the rise of mainland Chinese manufacturers, market competition has gradually intensified. With the help of the cost resources of mainland China's advantages, mainland Chinese companies still have a lot of room for growth in the quartz crystal resonator industry.
According to the 2017 annual report of Taiwan Jingji Co., Ltd., the global output value of frequency components remained at US$3.1-3.3 billion, with an annual synthesis growth rate of 0.1%. The annual sales of global frequency components are estimated to be 17.5-18.5 billion, with an annual compound growth rate of 2.1%.
2017 fundraising project "TKD-M series micro chip high-frequency crystal resonator production line (Phase II) expansion project" has invested a total of 82.5476 million yuan, accounting for 41.80% of the actual net funds raised by convertible bond fundraising projects;
fundraising project "TKD-M series temperature compensation micro chip high-frequency crystal resonator industrialization project" has invested a total of 114.9994 million yuan, accounting for 58.23% of the actual net funds raised by convertible bond fundraising projects.
The funds for the above-mentioned fundraising project have been fully invested, and its economic benefits are in the process of release.
Financial statements for the past 8 years
From the financial statements, the company's sales volume increased from 197 million to 611 million between 2011 and 2018, but the company's net profit increased very little. At the same time, the company's sales expenses increased by nearly 500% in the past 8 years, and operating expenses increased from 144 million to 557 million. Although the increase rate is the same as operating income, it is far greater than the net profit income. This fully shows that after the 2018 annual report mentioned that the projects put into production in China have intensified industry competition, and from the perspective of the company's gross profit margin, the industry is not having a good time.
Conclusion:
industry replacement imagination space is indeed huge, but the industry's gross profit margin is too low, and cost expenditures soar, the product's core technology advantages are not obvious, and it does not have a moat effect. It is expected that the company's turnover will increase to 1 billion in the next five years, but if the company does not reduce costs, even if calculated based on the net profit margin in 2017, the net profit in html will not exceed 150 million in 45 years. Given the risk price-to-earnings ratio of about 60 times and the safe price-to-earnings ratio of 30 times, the corresponding market value will be 9 billion and 4.5 billion respectively. As of the closing of July 4, 2019, the company's market value was 3.4 billion. If is calculated based on 100 million net conservative profit, the corresponding market value is 6 billion and 3 billion respectively. Faced with the uncertainty of the trade war, future revenue and market size are not certain.
Conclusion: The company does not have the characteristics of Davis double-click. (text | Listed company research smileofme)
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