In this article, the author will introduce a popular A-share 5G industry chain-related company "Sega Technology (002796)".

Sega Technology's business is mainly divided into two parts: precision box systems and mobile communication equipment. The main focus is "mobile communication equipment".

And the business logic of this company has many similarities with the very popular consumer electronics company "Luxshare Precision"!

1. The profitability of the "precision cabinet system" business is weak

The precision cabinet system is based on system integration design and uses advanced processing methods of modern machining to Various car bodies and cabinet systems made of metal or non-metal materials.

The main products include elevator car systems and professional equipment cabinet systems. The customers of the elevator car system are mainly downstream elevator brand manufacturers (Schindler, KONE, ThyssenKrupp, Otis, etc.). The main customers of the professional equipment cabinet system include Thermo Fisher, L-3, Sanmina Corporation, Celestica, AMEC, GoodWe and other high-quality domestic and foreign customers.

Among them, the elevator car system accounts for a relatively large proportion, accounting for 25.72% of the revenue reported in the 2019 interim report, and the professional equipment cabinet system accounts for a relatively small amount, only 4.03%.

1. As can be seen from the above figure, the average growth rate of the precision box system business has remained low in recent years, mainly due to the decline in investment growth and the impact of real estate regulation. It is expected that the future investment growth rate will Remain low and real estate regulation is still strict, so the growth potential of this business is limited;

2. Weak profitability: 1) According to the data in the 2018 annual report: the revenue and net profit attributable to the parent company in 2018 were They were 1.28 billion and 48.6087 million respectively. Among them, the revenue of "precision box system" was 569 million, but its net profit attributable to the parent company was only about 6.4336 million, and the net profit rate was only 1.13%.

The main reason why profitability is so low is that the prices of raw materials (stainless steel plates, steel plates, aluminum plates) continue to run at high levels, leading to a decline in profitability. This situation has already begun in the third quarter of 2016. For this reason, the company Measures to "reduce costs and increase efficiency" were taken, but the results were minimal, and profitability was still unable to recover until the end of 2018;

2) According to data from the 2019 semi-annual report: "Precision Box System" in the first half of the year The business's net profit attributable to the parent company is approximately 10 million, revenue is 270 million, and net profit rate is 3.7%.

Compared with 2018, profitability has rebounded to a certain extent, but is still low. According to the company's 2019 semi-annual report, this is mainly because the "cost reduction and efficiency improvement" measures have initially achieved results and net profit has increased year-on-year. 269.10%.

However, this business is not the main focus. The second business is introduced in detail below.

2. Order is king: radio frequency components and antennas

The company’s mobile communication equipment business is mainly carried out through its wholly-owned subsidiary Bofa, and its main products are filters and duplexers etc. RF components and base station antennas.

Everyone can understand the purpose of the base station antenna, but what is the filter used for? The filter is a core radio frequency device. It is a device that selects radio frequency signals of a specific frequency in mobile communication equipment. It is used to eliminate interference clutter, allow useful signals to pass without attenuation as much as possible, and attenuate useless signals as much as possible.

1. Entered the supply chain of mainstream manufacturers, but has not yet increased its volume

1) Filter: Currently one of the three core suppliers of ZTE filter products, accounting for about 30% share and has been supplied in batches;

At the same time, the company has proactively laid out ceramic filters through the acquisition of Suzhou Jiepin Electronic Technology Co., Ltd. This new type of filter is smaller in size and can meet the requirements of 5G base stations for filter miniaturization. It consumes less power and will cost less once mass production is achieved.

At present, the ceramic filter production line has passed customer acceptance. It can be seen from the 2019 semi-annual report that sales of 3 million ceramic filters have been achieved in the first half of the year;

2) Base station Antenna: 4G antennas are mainly supplied to the North American and Japanese markets, and overseas revenue increased by 27.79% in the first half of the year.

In North America, the market is mainly developed through the subsidiary company Dengyu USA, and the first order was obtained at the end of 2018; in Japan, mainly conducts business through the Sun Company "Enden Kai", which was transferred from Nippon Electric Corporation (engaged in the manufacturing and sales of antennas, filters and other communication equipment) in February 2016 by Bofat (a wholly-owned subsidiary) acquired through acquisition.

5G antennas are mainly in the domestic market. The main customer is ZTE. It has been supplied in small batches and has not yet become its core supplier.

3) In addition, the company successfully entered Ericsson's supply chain in the first half of the year, which is undoubtedly a big plus! However, the specific product categories supplied were not disclosed.

In summary, except for filters, which have become one of ZTE’s core suppliers and are supplied in batches, they are either supplied in small batches or have just entered the supply chain, and are still far away from large-scale production. .

However, this is not surprising, because the construction of 5G networks has only started in 2019, and the major downstream manufacturers (Huawei, Ericsson, ZTE, etc.) have not yet ramped up their production. It is expected that 5G construction will take place in 2020 and 2021 Peak period!

2. Occupying a weak position in the industrial chain, orders are king!

In fact, Sega Technology’s RF devices and antennas do not have much technical content. You can tell by looking at their gross profit margin (Figure 3 above). There are many domestic suppliers that can produce them (such as Tongyu Communications, ZTE's own antenna company: Mobi Antenna), so it is in a weak position in the industry chain and relies entirely on major communication equipment integration manufacturers (Huawei, Ericsson, Nokia, ZTE, etc.) to "buy and sell".

For Sega Technology, as long as it can get orders from major manufacturers, it can achieve steady growth!

Speaking of which, it looks very similar to Luxshare Precision!

However, it is not so easy to get orders. First, you must be "accurate" about technology development trends and rhythms, prepare in advance, and then enter the supply chain of large manufacturers and gain their trust. Finally, you must There is enough production capacity.

Therefore, during the peak periods of 5G construction in 2020 and 2021, a large number of orders must be obtained, otherwise they may be eliminated by the market!

Conclusion