Tongding Interconnect (002491): The proportion of equipment revenue will further increase, and traffic and safety promotion in 2020 will drive performance recovery

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2020-05-17 0 Comment

Tongding Interconnect (002491): The proportion of equipment revenue will further increase, and traffic and safety promotion in 2020 will drive performance recovery
The company’s recent situation takes into account that the overall supply of the optical fiber and cable industry exceeds supply and the boom is at a low point. We lower the company’s target price by 18% to 7.80 yuan, maintaining a neutral rating, but it is recommended to pay attention to the industry development after 3Q19, 5G is expected to become a driving factor for the industry.  Comment on the domestic optical fiber and cable price cut in 2019, but Tongding Interconnection gained more share in mobile tenders during the year, but the short-term gross profit margin fell severely, resulting in pressure on performance during the year.  Prices are likely to remain or increase in a small range in 2020.However, the industry demand is not clear enough. According to the neutral calculation simulation, we believe that the industry may return to growth due to 5G construction in 2020, but the growth period is weak, only 12%.At the same time, the domestic light rod throughput has gradually expanded and competition has intensified.  We believe that the new price of China Mobile’s fiber optic cable collection will be implemented in the middle of 2Q19, so 3Q19 will be the worst time for the industry. After 3Q, it is recommended to pay attention to the development of the industry.The use of optical fiber in 5G will increase every year in 2020, and the company’s throughput will have room for improvement, driving revenue and gross profit margins upward.  The subsidiaries Ruiyi Information and Byzoro Network are in a period of rising performance. We believe that the internal network traffic is increasing, and the business of the two companies is expected to achieve rapid growth.At the same time, the company acquired a minority stake in UT Starcom in 2019, and we believe that it is expected to obtain a certain share in the 5G bearer network 深圳桑拿网 tender.  Estimates suggest that we lower the company’s 19 / 20E profit forecast by 54% / 48% to 2.20/3.270,000 yuan, currently corresponding to 19/20 years 43.4/29.1x P / E.Reduce the company’s target price by 18% to 7.80 yuan, corresponding to 19/20 years 44.8/30.1x P / E, currently expecting 3% upside.  Risk FTTH migration speed is faster than expected, and the pulling effect of 5G construction on optical fiber exceeds expectations.  The scale of the company’s goodwill is about 9.500,000 yuan, need long-term attention