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World Investor Week丨Electronics industry with equal emphasis on technology and manufacturing (Part 2)
To understand a listed company, you must be familiar with the industry environment in which the company operates. In order to help investors master the basic skills of financial analysis in different industries and improve their investment decision-making ability, the Investment Education Center of Shenzhen Stock Exchange, together with KPMG, Haitong Securities, Changjiang Securities, and Industrial Securities, jointly launched a series of investment education articles on “Industry from a Financial Perspective”. This article is the twelfth article, for you to interpret the main financial indicators of the electronics industry, let's take a look.
The electronics industry with equal emphasis on technology and manufacturing attributes (Part 2)
In the last article, we introduced the development status of the electronics industry, the profit model, and the dual attributes of technology and manufacturing. In this article, we will talk about two major categories of financial indicators that the electronics industry needs to focus on, namely profitability indicators and asset quality indicators. .
1. Understand corporate strength from profitability indicators
Profitability indicators mainly include gross profit margin, net profit margin attributable to the parent, and expense ratio during the period of negative indicators.
For electronics companies, corporate profitability is related to a variety of factors. First, in the production link, the upstream supply chain has a stable share, high gross profit margin, low barriers in the downstream link, and the competition pattern is easy to deteriorate. In 2018, the value of some parts and components doubled due to the demand for innovation; third, the industry was cyclical. When the supply and demand of products such as LED chips and panels tightened, the price increase factor caused the gross profit rate of manufacturers to rise, and once the production capacity was released, the gross profit rate was increased. began to fall rapidly. Therefore, when analyzing indicators such as corporate gross profit margin and net profit margin attributable to the parent, it is necessary to make comprehensive judgments based on the above factors.
In addition to industry factors, the company's own cost control level and scale production capacity will also affect the cost side, reflecting the difference in gross profit margin. Generally speaking, companies with high level of cost control and large-scale production capacity tend to have higher gross profit margins. It should be noted that electronic products are born with the attribute of price reduction. Therefore, if a company wants to increase market share and maintain the added value of products, it needs to continuously launch new products, bind customers, and improve the quality rate. This is the key to maintaining gross profit margins, and it is also our One of the concerns of understanding the comprehensive strength of an enterprise.
In addition, from the level and structure of expenses, you can also get a glimpse of the strength of the enterprise. First, the level of sales expenses reflects the channel differences of products. For example, the sales expenses of general equipment private enterprises are higher, while those of state-owned enterprises are lower; secondly, R&D investment reflects the innovation ability of enterprises, but it is also necessary to pay attention to whether the capitalization ratio is reasonable; Thirdly, the exchange rate may also affect the profit of the company. The export of electronic products in my country has a large proportion, and the financial expenses are greatly affected by the exchange rate. For small electronic enterprises, changes in the cost side may have a greater impact on the profit, which needs to be focused on.
2. Pay attention to the quality indicators of assets and judge the competitiveness of the company
Asset quality indicators mainly include the scale and depreciation period of fixed assets, the scale and structure of inventories, the scale and structure of accounts receivable, and the relevant turnover rate.
Investment in fixed assets is the main expenditure of electronic enterprises in my country. In the process of analysis, special attention should be paid to the industry attributes of electronic enterprises. For example, the consumer electronics industry changes rapidly, and it is necessary to pay attention to whether the amount of investment in fixed assets in the early stage is too large, and whether the depreciation period is reasonable and low. Whether the operating rate is too heavy, the risk of asset-liability ratio, etc.; another example is the large investment in wafer manufacturing capital, and it is necessary to pay attention to the annual change in the amount of investment in fixed assets.
Large-scale manufacturing corresponds to large orders and large customers, and the scale of inventory and accounts receivable is closely related to the turnover rate. Reasonable judgment on the industry and the continuity of customer orders are the standards for enterprise stocking. The production model of most electronics companies is "production based on sales", that is, customers usually provide predictable order plans in advance according to their own sales plans, and in order to meet short-term supply and seize the market, the production plan may be biased, downstream Once demand is sluggish, inventory products with customized attributes may face impairment. Therefore, customer orders and operational risks also need to be considered.
When investing in the electronics industry, it is necessary to analyze the growth of the company, and judge the relevant financial indicators of the company, so as to help us more accurately explore the company's development stage, profitability and corporate competitiveness, so as to make more rational investment decisions.
(This article is contributed by Mo Wenyu of Changjiang Securities Research Institute)
(Disclaimer: This article is published for investor education purposes only and does not constitute investment advice. Investors operate on this basis at their own risk. Shenzhen Stock Exchange strives to ensure that the information contained in this article is accurate and reliable, but does not guarantee its accuracy or completeness. does not make any guarantees on the timeliness and timeliness, and is not responsible for the loss caused by the use of this article.)