Yesterday, we covered Junsheng Electronics, smoothed its glorious and unbearable past, and determined that it was an opportunity to obtain excess earnings. As seen from this year’s mid and third quarter reports, the company is expected to usher in a turning point in business.
Let’s take a look at the situation of the Chinese newspaper first.
A Brief Analysis of Junsheng Electronics’ 2022 Mid and Third Quarterly Reports
In the first half of 2022, the company achieved a revenue of 22.92 billion yuan, a year-on-year decrease of 3.09%; Net profit attributable to the parent company was a loss of 105 million yuan, a year-on-year decrease of 373 million yuan; Deduction of non net profit was 81.7531 million yuan, a year-on-year decrease of 218 million yuan. Specifically, in Q2, the revenue in a single quarter was 11.19 billion yuan, down 1.5% year-on-year and 4.6% month-on-month; The net profit attributable to the parent company was 52 million yuan, a year-on-year increase of 11%, and a month-on-month increase of 210 million yuan, realizing the first quarterly turnaround in nearly two years. The gross profit margin was 11.01%, a year-on-year decrease of 0.13 percentage points, and a month-on-month increase of 0.14 percentage points; The net profit rate on sales was 0.39%, a year-on-year increase of 1.64 percentage points, and a month-on-month increase of 3.00 percentage points.https://forum.stoneitech.com/
From the second quarter, the company showed signs of early dawn.
However, one thing to say is that the turnaround in the second quarter was actually average. If you exclude the exchange gains caused by the depreciation of the RMB, you will still be in a loss state. Fortunately, the third quarter report continued to perform well, confirming the possibility that the company’s operations could usher in a turning point.
In the first three quarters of 2022, the company achieved a revenue of 35.743 billion yuan, a year-on-year increase of 4.8%, and a net profit attributable to the parent company of 131 million yuan, a year-on-year increase of 625.6%, slightly exceeding the performance forecast limit of the third quarter report. It achieved a net profit deduction of 253 million yuan, a year-on-year increase of 132.8%. Q3 achieved a revenue of 12.823 billion yuan, a year-on-year increase of 22.6%, and a month-on-month increase of 14.6%; The net profit attributable to the parent company was 236 million yuan, compared to a loss of 251 million yuan in the same period last year, a year-on-year increase of 353.8%; The net profit after deduction was 171 million yuan, compared to a loss of 192 million yuan in the same period last year, with a year-on-year increase of 33.6%. Net cash flow from operating activities was 528 million, a significant increase compared to the first and second quarters.
The improvement in financial aspects is largely due to the continuous cost reduction and efficiency increase of the company, especially as the security business integration gradually comes to an end and the corresponding restructuring costs are reduced.
In the past few years, due to mergers and acquisitions, the company’s restructuring costs in 2018-2022H1 were approximately 7.9, 6.0, 4.4, 230, and 200 million yuan, respectively, which had a significant impact on profits. However, the restructuring costs in Q3 were only 5.63 million yuan, which could almost be ignored.
This is also the reason why the new energy explosion is optimistic that Junsheng Electronics is expected to usher in a turning point.
02 Junsheng Electronics is expected to usher in a turning point
Asset mergers and acquisitions are an important way to quickly expand assets, but mergers and acquisitions require a very high level of reorganization and integration capabilities for enterprises. In particular, Junsheng Electronics specializes in acquiring defective assets, and there is a relatively large degree of business overlap between KSS and Takata businesses acquired previously, making it even more difficult to overlap.
In the past few years, the company has spent a lot of time and energy on the integration of its security business, with the basic direction of integrating Takata assets and KSS, integrating companies with high regional overlap and low production efficiency, and restructuring and downsizing. Give full play to the special advantages of China, establish a global research and development center in Shanghai and a new industrial base in Hefei, and transfer the production bases of relatively high cost developed countries such as Europe, America, Japan, and South Korea to low-cost countries, including Romania, Hungary, Mexico, and Southeast Asia, to reduce costs.
Now that the integration of the security business has initially ended, it is expected to gradually contribute to performance in the future.
With the merger and acquisition of KSS and Takata, Junsheng has now become the second largest supplier in the global automotive safety field, with a global market share of about 26%, second only to Autoliv’s 43%.
There is no doubt about the importance of automotive safety systems. Downstream vehicle manufacturers are also very cautious in selecting suppliers. The global automotive safety market has a very high market concentration, especially in the passive safety market, which includes seat belts, airbags, safety seats, safety bodies, etc. Currently, the global passive safety market CR3 exceeds 90%.
In addition, with the increasing emphasis on vehicle safety in the market, especially in the era of new energy vehicles, the value content of active and passive safety in the entire vehicle is also continuously increasing, such as the increasing number of air bags, driver status monitoring systems, and so on. The global safety market is expected to maintain good growth in the future.
After the initial integration of the security business, Junsheng Electronics, relying on the advantages of manufacturing in China, is expected to not only enjoy the continuous expansion of the global security market, but also gradually increase its market share. It is expected that from 2023, the security business will truly become a cornerstone business that continues to contribute cash flow and performance. In addition to the automotive safety business, Junsheng’s automotive electronics business highlights are even greater.
03 Rapid explosion of automotive electronics business
With the advent of the era of new energy vehicles, the popularity of automotive intelligence has accelerated, and cabin intelligence is the core component of vehicle intelligence, and is currently the most easily perceived automotive intelligent product by consumers. It has now become a field that various new energy vehicle manufacturers and automotive parts companies are vigorously investing in.
In this regard, the domain controller is one of the most core products.
The simple understanding of the so-called domain controller is that in order to achieve various important functions, such as vehicle speed sensing, temperature sensing, and so on, cars need to install corresponding sensors, and then configure a control chip for these sensors. However, after the electrification of automobiles, they become more and more intelligent, and there are more and more corresponding sensors. If they remain the same as before, there will also be more and more control chips, not only will the cost increase significantly, but also the difficulty of collaborative work between sensors will increase linearly.
Therefore, the concept of domain controller has emerged. Bosch divides the vehicle into five areas: power domain, chassis domain, cockpit domain, autonomous driving domain, and vehicle body domain. If the sensors in each area are controlled by the same control chip, then this control chip and its supporting electronic components such as PCBs are called domain controllers.
According to data from ICVTank, the global shipment volume of intelligent cockpit domain controllers will be 2.4 million sets in 2021, and it is expected that the global shipment volume of intelligent cockpit domain controllers will reach 13 million sets in 2025. At that time, the market space for domain controllers in China alone will exceed 100 billion yuan.
The intelligent cockpit business of Junsheng Electronics has changed from providing a single module or system iteration to an integrated intelligent cockpit solution covering domain controllers, operating systems, human-computer interaction, middleware and application layer algorithms.
In particular, domain controllers, like Desai Xiwei, are both domestic industry leaders. Desai Xiwei’s autonomous driving domain controller business is just a bit ahead. However, the market value of Desai Xiwei is more than twice the average, and its peak is more than 100 billion, with a very large gap.
Here is a relatively large expectation gap. As the company’s integration gradually comes to an end, its financial situation gradually improves, and the market will also correspond to its due market value.
Overall, Junsheng Electronics is a very good product, although there are indeed some uncertainties. However, based on the past ambitious efforts of the management, combined with the efforts of integration over the past few years, the integration is now initially completed, and the painstaking efforts of the past are expected to usher in results.
The year 2023 is expected to be a turning point for the company, and it will also be one of the most noteworthy companies in 2023.
