Apple's wave of replacement phones has struck again.
In recent years, the innovation of smart phones in form and function has stagnated, and the replacement cycle has gradually lengthened, and at the WWD2024 conference, Apple launched the Apple Intelligence personalized intelligent system, and edge AI may promote a new round of replacement.
Compared with traditional cloud AI, edge AI has the advantages of computing power saving, low latency, privacy customization, and simple interaction, and can provide customers with personalized AI services.
Apple's move has once again attracted the attention of the capital market for two main reasons:
On the one hand, Apple is at the top of technological innovation in consumer electronics.
From the touch screen interface, multi-touch to the elegant, concise appearance, Apple's previous innovations have undoubtedly promoted the replacement of consumer electronics terminals, and this AI change only supports iPhone 15 pro and iPhone 15 pro max and above, which can undoubtedly force users to buy phones.
On the other hand, the huge fruit chain system brings vitality to the entire industry.
Apple has a presence in various technology fields, foundries around the world, and suppliers in various countries. Only in the field of consumer electronics, affected by the wave of replacement, the popularity of fruit chain companies such as Lixun Precision, Pengding Holdings, Dongshan Precision, Lens Technology, and Crystal Optoelectronics remains high.
Among them, as the absolute leader of domestic glass cover plates, Lens Technology has been highly sought after by capital recently, with 50 billion funds such as E Fund and Huatai building momentum for it, and Apple also attaches great importance to the cooperation between the two sides, and 60% of Lens Technology's performance is provided by Apple.
You may not be familiar with the name Lens Technology, but you must have used its product - glass substrate, which is the glass screen on smartphones.
From the beginning of 2D pure flat glass to 2.5D glass with a certain curvature at the edge and then to the widely used 3D curved screen, it can be said that how big the market of consumer terminals is, how big the future glass substrate market space is.
With the upgrading and iteration of technology, the application of 3.5D glass in the future is not a dream, the upgraded 3.5D glass adopts glass fusion bonding and CNC carving process, after a long time of polishing and cavity spraying and coloring and other complex processes, can achieve a truly integrated appearance effect.
So, where is the hole card of Lens Technology favored by all kinds of capital?
On the one hand, backed by Apple, Huawei, and Xiaomi, its performance has grown steadily.
From 2019 to 2023, the company's operating income will grow at a compound annual growth rate of 16%, and its operating income will exceed 54 billion yuan in 2023, ranking first in the entire glass cover industry.
At the same time, the company's net profit growth is steady, with the net profit attributable to the parent company exceeding 3 billion yuan in 2023 and reaching 300 million yuan in the first quarter of 2024, a year-on-year increase of 380%.
The reason for the stable growth of Lens Technology's performance is that it is backed by major consumer electronics manufacturers at home and abroad, and the company is mainly engaged in various electronic components, of which 82% of its revenue comes from smartphones and computers.
With years of accumulation and scale advantages, Lens Technology has established long-term cooperative relations with major consumer electronics manufacturers Apple, Huawei, Xiaomi, Samsung, and OPPO.
Moreover, the order concentration of Lens Technology is very high, and the company's top five customers have contributed more than 80% of the sales revenue in the past three years, and the source of orders is very stable.
In particular, it is deeply bound to Apple, and Apple provides 50% to 70% of its order volume every year.
On the other hand, the vertical integration capability is remarkable, and the gross profit margin is the first in the industry.
In the past five years, the gross profit margin of Lens Technology is much higher than that of its peers such as OFILM and Xingxing Technology, and the gross profit margin is about 20% except for 2023, which is rare in the field of glass substrates.
From the cover glass industry chain, it can be found that the middle of the industrial chain where Lens Technology is located is the place with the least "oil and water".
Because the upstream is the production of materials and equipment, the most important of which is the glass substrate and hot bending machine due to high technical requirements for a long time dependent on imports, the gross profit margin will naturally not be low, and the downstream is Apple, Huawei and other consumer electronics manufacturers, the gross profit margin is often more than 50%.
So, how does Lens Technology's perennial gross profit margin of up to 20% achieve?
In-depth understanding found that horizontally, Lens Technology actively develops new products, establishes subsidiaries such as Lens Hualian, Lens Sinocera, and Lens Xiangtan, and develops new materials such as ceramics and sapphires, and the gross profit margin of these materials will be much higher than that of glass.
Vertically, vertically integrated supply chain, upstream materials, in 2018, the company established Lens New Materials, the top ten accessories and assistive devices have now achieved a high proportion of self-sufficiency.
In the field of downstream customers, the company actively expands the whole machine assembly business, and in 2021, the company was successfully promoted to the core assembly supplier of Xiaomi's mid-to-high-end mobile phones.
Through the in-depth integration of the industrial chain and the product side, the company's gross profit margin has been improved, and the profitability has been further improved.
In addition, the growth potential of Lens Technology in the future is also huge, which is mainly reflected in the following two aspects:
First, the company has the industry's top R&D and innovation capabilities.
From 2019 to 2023, the company's R&D investment has been increasing, and the R&D investment in 2023 has reached 2.3 billion, and the R&D expense rate has been stable at about 5%.
In terms of high-end glass manufacturing process, there is only one domestic 3D glass supplier; In terms of product upgrading, the company is the first company to introduce glass screens into high-end smartphones, and successfully introduce ceramics and sapphire materials into mobile phones and smart wearable devices; In terms of new product development, the company's protective glass size range from 3mm to 2500mm has a layout, and the accuracy has reached the nanometer level.
Second, develop the new energy vehicle business and create a second growth curve.
The new energy vehicle components have more commonalities with the company's current business, and the company actively lays out the new energy vehicle components business and cuts into the industrial chain of Tesla, Bentley and Porsche.
At present, it has mass-produced many kinds of products, including on-board central control screens, instrument panel components, B-pillars, C-pillars, and other intelligent cockpit display components.
The automotive business also grew rapidly, and its performance continued to increase. In 2023, the company's new energy vehicle and intelligent cockpit business will achieve operating income of 4.998 billion yuan, accounting for 9.17% of the company's total revenue, a year-on-year increase of 39.47%.
Finally, to sum up.
Lens Technology is an extremely high-quality existence in the field of domestic glass substrates in terms of performance level, R&D strength and growth space, coupled with the PE valuation of 30 times is still at the low level of the industry, and it is expected to usher in the Davis double click of performance and valuation.
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