2021-10-26 Minsheng Securities Co., Ltd. Wang Fang, Chen Haijin and Chen Rongfang conducted research on Lianchuang and released a research report entitled "Q3 performance is up month-on-month, vehicle optics is growing strongly". The current share price is 18.06 yuan.

Lianchuang Electronics (002036)
I. Overview of events
According to the company's three-quarter report on October 25th, the company's main income in the first three quarters of 21 years was 7.121 billion yuan, up 26% from the same period last year; the net profit from its mother was 188 million yuan, down 10% from the same period last year; and the non-net profit was 129 million yuan, down 12% from the same period last year.
II. Analysis and judgment
Q3 performance is up month-on-month, increasing investment in research and development of new vehicles and wide-angle high-definition products
The company achieved revenue of 7.121 billion yuan in the first three quarters, an increase of 26%, and a net profit of 188 million yuan, a decrease of 10%. 1) Revenue side: the revenue in the third quarter alone is 2.3 billion yuan, with a decrease of 27% and an annular decrease of 8.7%, mainly due to non-optical businesses such as the company's strategic contraction. 2) profit side: the return net profit in the third quarter is 91 million yuan, an increase of 48%, and a decrease of 26%, due to the increase in upstream costs and the slowing down of mobile phone growth. The gross profit margin in the third quarter is 9.8%, which is higher than that of Q2, benefiting from the increase in capacity utilization of optical business. 3) R & D side: the development expenditure in the first three quarters increased by 380 million over the beginning of the year, an increase of 500% over the same period last year, mainly due to the increase in R & D demand for a large number of new projects in vehicle, high-definition, wide-angle and other businesses, which will bring more performance contributions to the company in the future.
The optical business creates the maximum increment, and the large-scale expansion of vehicle optics is just around the corner.
In the first three quarters, the company's optical revenue increased by 60%, of which revenue from the vehicle business increased by 453% compared with the same period last year. In the third quarter alone, optical revenue increased by 36%, revenue from high-definition wide-angle lenses and modules increased by 87%, and revenue from vehicle lenses and modules grew by 620%. Profitability has been enhanced. The company cooperates strategically with Mobileye, Nvidia, Huawei, Aurora, DJI and other solution manufacturers, and the car lens signs contracts with Valeo, Magna, Aptiv, Mcnex, Tesla, NIO Inc. and other well-known customers. The company's 8MADAS car lens has also been successfully developed and recognized by customers, and is expected to be further extended to the module.
The capacity reserve of lens and module is sufficient, and production expansion is expected to consolidate core advantages.
The production capacity reserve of the company is sufficient, the self-control rate of molded glass is 100%, and the resources are inclined to vehicle optics. Hefei vehicle Optical Industrial Park has a new plan of 50 million / year vehicle lenses and 50 million / year modules, and the production capacity planning fully strengthens the core advantages.
III. Investment suggestions
It is estimated that the company's revenue from 2021 to 2023 is 95x113 / 13.5 billion yuan, and the net profit returned to the mother is 3.0 yuan 5.0 / 840 million yuan. Based on 20 years, the compound growth rate of net profit returned to the mother in the next three years is 72%, corresponding to PEG0.83. Taking into account the on-board optical volume and price rise of the "golden track", the company is the core manufacturer of ADAS optics, with high competition barriers and strong scarcity, and carries out valuation switching at the end of the year to maintain the "recommended" rating.
Fourth, risk tips:
The development of car customers is not as expected, the capacity expansion is not as expected, and the yield of products is not as expected.

A total of seven agencies have rated the stock in the last 90 days, including six buy ratings and one overweight rating; the average institutional target price in the past 90 days is 20.78; according to Securities Star valuation analysis tool, Lianchuang (002036) good company has a rating of 3 stars, a good price rating of 2 stars and a comprehensive valuation rating of 2.5 stars.