Author / Avocado under the stars
Edit/Spinach's Starry Sky
Typography/Hot dry noodles under the stars
In June, it's the annual "apple season" again. As a rule of thumb, every year Apple (AAPL) updates its operating system in June and launches new products in September. On June 11, at the 2024 Worldwide Developers Conference, Apple updated operating systems such as IOS, iPadOS, and MacOS as usual.
In addition, in the era of AI competition, the smart suite released by Apple has of course become the highlight of the conference. Not only that, in order to strengthen the intelligence of the product, Apple officially announced that it will cooperate with OpenAI. When Apple's own capabilities are insufficient, users can choose to use ChatGPT to solve it. The combination of strong and powerful has once again pushed the entire Apple industry chain to the forefront.
In the secondary market, Apple's concept stocks, which were originally somewhat "slightly cool", began to rise against the trend. Lingyi Zhizao (002600) is one of them.
Since June, taking advantage of Apple's east wind, the share price of Lingyi Zhizao has been rising. Although there has been a pullback recently, compared with the previous level of less than 5 yuan / share, the increase is still very obvious.
Source: Oriental Fortune official website Lingyi Intelligent Manufacturing (as of July 3, 2024)
Although the popularity is high, the author believes that the future of Lingyi is still stormy.
First of all, popularity does not represent performance; Secondly, even if it really brings performance to Apple, it is unknown how much Lingyi Zhizhi can get; In addition, although the company has developed photovoltaic and automotive business, the scale is still small and cannot support the pillars of Lingyi.
1. Popularity does not represent performance
According to the financial report, Lingyi is mainly engaged in precision functional parts, structural parts, modules and chargers, and its products are mainly used in AI terminal equipment and communications, automobiles and photovoltaic energy storage industries.
Judging from the data: in 2023, about 90% of Lingyi's revenue will come from the consumer electronics industry. In addition, overseas revenue accounted for about 70%, mainly from Apple orders. With this relationship, if the apple rises, the benefit will rise.
Source: Straight Flush iFinD - Operating Income
The point is, will Apple really go up?
As we all know, in recent years, the entire consumer electronics industry has not had a good time. At this time, Apple officially announced: Apple's series of AI functions can only be implemented on devices such as iPhone 15 Pro/Max and iPads and Macs equipped with M1 or subsequent chips, and it is logical that AI will help promote consumers to upgrade their devices, thereby driving product sales.
However, the premise of any consumption is that there is both the willingness and the ability to consume. In other words, will consumers really upgrade their devices for so-called "AI capabilities"?
Ivan Lam, a senior analyst at Counterpoint Research, said that the introduction of Apple's generative AI is mainly to catch up with market expectations, and it will take time to improve specific functions and expand the user base. In the short term, the new technology may not be particularly significant in boosting iPhone sales.
Second, Lingyi, how much meat can be eaten
In regression, even if "AI really drives the sales of products", how much meat can a supplier like Lingyi eat?
For Apple, the cost of completing the AI upgrade will inevitably increase. In order to maintain the original profit margins, either the price is increased, or other costs are reduced.
Let's start with the price increase. Market demand is already weak, and prices are rising, which naturally affects sales.
If the price is not raised, other costs can only be compressed. According to Apple's tonality, it is bound to squeeze upstream enterprises. The data shows that from 2021 to 2023, the gross profit margin of Lingyi's consumer electronics business will remain stable at about 21%, and the company's comprehensive gross profit margin will be about 20%. However, in the first quarter of 2024, affected by the adjustment of the company's business structure (the proportion of photovoltaic and automotive business increased, but the scale was small and the gross profit margin was low), the company's comprehensive gross profit margin decreased to 14.99%, and the net sales profit margin was only 4.69%.
Source: Straight Flush iFinD – Financial Analysis
If the profit margin is compressed again, Lingyi's net profit margin may continue to decline. In the end, I don't know whether to eat meat or be robbed of meat.
Third, the new business, small scale is not profitable
In fact, after years of market education, fruit chain enterprises have known that the new machine can no longer become a lifesaver for the entire industrial chain. Upstream manufacturers have "turned around" to find new growth space. Lingyi Intelligent Manufacturing is no exception, choosing to make efforts on the automotive and photovoltaic tracks.
In the past few years, Lingyi has made a series of "capital gamblings", and has successively acquired companies such as Selkang (89.1 million US dollars), Mianyang Weiqi (21.15 million yuan), Zhejiang Jintai (71.66 million yuan) and so on. Among them, the India plant of Cercom is the foundry of Enphase (ENPH), a global leader in photovoltaic inverters; Zhejiang Jintai mainly lays out battery cell aluminum shells, covers, adapters and other battery structural parts and other automobile-related precision parts such as flexible soft connections and injection molded parts, and maintains long-term business relationships with leading enterprises such as Tesla, Mercedes-Benz and BMW.
However, the capital gambled and led to a significant increase in orders.
According to the company's disclosed data, although the revenue of the automobile business has increased, the current contribution is still small, and it cannot be called the second growth curve. As for the photovoltaic business, it is not even separately disclosed.
Source: Straight Flush iFinD - Operating Income
Limited by scale, the gross profit margin of the automotive business in 2023 will only be 5.15%.
Under the wave of AI, it is still uncertain whether Apple's AI products can bring it a transformative performance breakthrough like 4G to 5G as it wishes. Even if it can really bring performance growth, it is really difficult to predict how much profit mainland fruit chain enterprises can gain in today's economic de-globalization. Once it falls short of expectations, the transformation business cannot keep up with it, and the future of Lingyi is still stormy.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.