A - share electronics industry three strong: components, semiconductor, PCB

The Q3 earnings season for A-shares has come to an end, and the performance of the electronics industry as A whole showed a slow season in the third quarter. Revenue for the first three quarters of the year was 1.58 trillion yuan, up 7.3 percent year-on-year from 10.1 percent in the first half and 17.6 percent in the same period last year.

(Source: wind) A-share electronics revenue and YOY for the first three quarters

Sluggish sales of mobile phones are one of the main reasons for the sluggish electronics industry in China. Mobile phones are the largest consumer electronics product by volume, even though Canalys reported that 352 million smartphones were shipped worldwide in the third quarter, the first growth in nearly two years. But shipments in China, which accounts for nearly 30 percent of the global market, continued to decline, with 97.8 million handsets shipped in the third quarter, down 3 percent from a year earlier.

As for net profit, net profit for the first three quarters of this year reached RMB71.161 billion, an annual increase of 2.8%, and a year-on-year decline of 3.4% in the first half of this year. However, the improvement in net profit mainly comes from expense control and outside income, not the improvement in the gross profit margin of the business.

(Source: wind) The A-share electronics industry in the first three quarters belongs to the parent company Chunyi and YOY

In terms of gross profit margin, the overall gross profit margin of the electronics industry declined slightly, reaching 15.48 percent in the first three quarters of this year, compared with 15.76 percent in the same period last year, due to lower product prices due to sluggish downstream demand.

(Source: wind) Gross profit margin of A-share electronics industry in the first three quarters

In addition, A-share electronics ROE was 7.01 percent in the first three quarters, compared with 7.59 percent in the same period last year. According to DuPont's analysis, the equity multiplier, asset turnover and net profit ratio in the first three quarters were 2.23, 0.62 and 4.46 percent, respectively, compared with 2.25, 0.66 and 4.74 percent in the same period last year, reflecting a decline in leverage, operating capacity and profitability in the electronics industry.

(Source: wind) ROE, equity multiplier, asset turnover and net profit ratio of A-share electronics industry in the first three quarters

But spending on research and development, a key indicator of future operating growth potential, remained unchanged from last year, reaching 3.99% of revenue, up 0.57 percentage point from the same period last year.

Electronic components, PCB and semiconductor A - share electronics industry three highlights

Electronic component manufacturing, PCB and semiconductor revenue and net profit rose in the first three quarters, mainly due to increased shipments of 5G base station equipment, as well as a significant increase in shipments of consumer electronics products such as TWS headphones.

(Source: Essence Securities of China) Revenue growth rate of A-share electronic groups in the first three quarters)

Electronics manufacturing was the best-performing sector in the first three quarters of the year, with the largest growth in revenue and net earnings attributable to parent companies. Excluding the impact of mergers and acquisitions and external profit and loss, the outstanding performance targets mainly include Lishun Precision, Goerl Shares, Linyi Manufacturing, Wentai Technology, Guanghong Technology and Fei Rongda.

Ritsu and Goerl, both core suppliers of Apple's Airpods, benefited from continued stronger-than-expected shipments of TWS headphones.

(Source: counterpoint) Estimated TWS headphone shipments

Wentai Technology and Guanghong Technology are well-known ODM and EMS OEM in China respectively. The company benefited from an increase in ODM orders and its acquisition of Dutch semiconductor giant Ansy.

For its part, Optohong has benefited from its own capacity expansion and Huawei's continued reordering of components to factories in China.

The operation of Linyi Manufacturing began to improve after the restructuring was completed. Feilongda is riding the 5G boom due to its product layout in the field of 5G mobile phones and base stations.

The semiconductor sector also did well, with third-quarter revenue up 16.68 percent on an annualized basis, following a 3.39 percent decline in the second quarter and 7.81 percent growth in the first half. The third quarter A share semiconductor performance contribution mainly from IC design, as semiconductor materials, equipment, closed test and IDM remained weak.

In terms of individual stocks, among IC design companies, Huiting Technology has the most outstanding performance, while Zhaoyi Innovation, Zhuosheng Micro and Uniguolinguo Micro also have good performance. As for the semiconductor materials and equipment field, Naura has a better performance.

Huidin Technology is mainly benefiting from increased demand for under-screen fingerprint chips and increased product penetration. It is the core supplier of Android mobile phone brand in China, accounting for more than 90% of the market. Performance has been growing rapidly since the fourth quarter of 2018.

As for the performance of PCB in the first three quarters of the electronic community is also a bright industry, the main contribution from the operation of high frequency, high speed multi-layer PCB products, the performance of traditional hard board is relatively weak. High level PCBS benefit from the upgrade of communication transmission flow and maintain high growth.

Since 2019, telecom companies are still expanding 4G systems, and 5G base stations are also actively being built, so the demand for high frequency and high speed multilayer PCB has significantly increased.

With the expansion of 5G commercial pace, the upgrading of consumer electronic products and the emergence of new applications, the further growth of Internet traffic, and the increasing demand for switches and servers driven by the construction of data centers, PCB's future growth potential sources.

According to Prismark's statistics, communications, consumer electronics and automobiles are the three industries with higher downstream demand growth.

(Source: Prismark) The proportion of output value of PCB downstream industries and its changing trend

As for the optical field, although the revenue of panel, touch screen and fingerprint module has increased, the profit of enterprises is under heavy pressure due to the pressure of industrial competition, especially the cost pressure brought by the investment of production expansion.

The third quarter of LED group presents the dilemma of both revenue and net profit decline, mainly because the industry has entered the mature stage, supply and demand balance but fierce competition. On the whole, there are few outstanding enterprises in the optical optoelectronics industry.