Quectel (603236): “Water sellers” in the IoT market have stabilized their gross margins + short-term investment brings high growth
Investment highlights 杭州夜生活网 covered for the first time by China Telecom (603236), which gave it an outperform rating with a target price of 193.50 RMB.Quectel Communications is the global leader in the IoT module industry. Its products cover multiple series such as 2/3/4 / 5G, and customers cover almost all IoT applications.China’s first.We are optimistic about the growth and company development of the Internet of Things industry, with reference to P / S, P / E and PEG to give outperforming industries.The reason is as follows: We are optimistic about the fast-growing IoT market.The cellular IoT market is still in the early stages of development. At the end of 2018, the minimum number of connections accounted for more than 60% of the world, but the absolute value was only 7.6.8 billion, with less than 0 per capita connections.6.However, the cellular IoT market is undergoing rapid development. From 2016 to 2018, the compound annual growth rate of connections has reached 121%. We believe that the conversion to 5G and the implementation of high value-added applications such as the Internet of Vehicles will lead to the development of global IoT in the next three yearsLead continues to achieve rapid growth. We recommend paying attention to the “water sellers” in the IoT market.The Internet of Things is widely used, and various application vendors are exploring market opportunities similar to the Nuggets model, which makes it difficult for investors to grasp the pace of development. However, the Internet of Things module is the main networking information portal for various types of terminals and the infrastructure of the Internet of Things.Module manufacturers such as Quectel can enjoy the dividend of the overall high-speed development of the cellular IoT industry with strong revenue certainty. Scale, R & D, market potential barriers to remote communications competition.1) The scale determines the closeness of the company’s cooperation with chip vendors such as Qualcomm / Huawei / MediaTek. The chip purchase price has advantages, and the chip accounts for about 70% of the module cost.2) The scale of R & D personnel ranks first in domestic IoT module manufacturers. Other manufacturers in similar products are expected to lead the market, seize the opportunity, seize the core profit period of new applications, and lock core customers.3) Entered overseas markets earlier, with many overseas certifications and exclusive sales channels, thus forming a gradual ecological formation. What makes us different from the market?The market is worried about the company’s revenue growth in the future. We believe that it can transition to 5G, the launch of Internet of Vehicles and other products and the growth of overseas markets, and the company’s revenue will maintain rapid growth.The market is worried that the company’s expense level is relatively high. We believe that the company’s 2019 is the expenditure period and it is expected to reach the welcome benefit in 2020. The increase in revenue will lead to a decline in the expense ratio and an increase in the level of net profit margin.The market is worried that the company’s estimates are too high, and we think that indicators such as P / S and PEG should be considered at the same time. Potential catalysts: Operators have a high growth in the number of IoT connections; applications such as connected cars have landed. Earnings forecast and forecast We expect the company 19?21-year revenue was 43/68/92 trillion, CAGR was 50%, and EPS was 1.91/3.51/6.42 yuan, CAGR is 47%.The company’s current consensus corresponds to 19/20 / 21e3.0/1.9/1.4x P / S, 74.4/40.5/22.1x P / E.We believe that the company is expected to become the No. 1 revenue in the global IoT module market in the future and enjoy the estimated premium; the profitability is intended to increase rapidly with scale expansion.For the first time, the company was rated “Outperformer” with a target price of 193.50 yuan, corresponding to 36% of upside, 19/20/21 years4.0/2.5/1.9 times P / S. Risks Exchange rate fluctuation risks; increased industry competition; Sino-US trade frictions eased and fell short of expectations.