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Juzi Technology (SZ: 300802) produces machine vision equipment, and its customers include Apple, Huawei, Xiaomi Group-W (HK: 01810), OPPO, VIVO and other well-known enterprises.

It looks good, but the stock price has dropped 40% from its highs, which makes people doubt life.

Looking at the performance, Juzi Technology is not very bad, and it has improved quarter by quarter:

The recent decline should be due to two reasons:

First, the upfront valuation is too high. After falling so much, the price-earnings ratio (TTM) is still as high as 54.88, and there is basically no growth in 2019 and 2020.

Secondly, as a new stock, in November 2020, when the ban was lifted, investment institutions began to sell and cash out.

Is there any chance in the future? It depends on the company’s prospects.

The main business of Juzi Technology is two:

The main part is machine vision equipment, accounting for 45.17%, with a gross profit margin of 57.93%.

Specific products include: 2D plane automatic optical inspection equipment (AOI), 3D stereo automatic optical inspection equipment, 3D solder paste inspection system (SolderPaste Inspection, SPI), laser engraving machine, etc.

Downstream industries are: PCB printed circuit boards, semiconductors, LED chips, etc.

Such as PCB defect detection: 3D, 2D fully automatic online (offline) AOI. Inspection after printing, inspection after placement, inspection after plug-in, inspection after reflow oven, inspection after wave soldering, etc. SMT surface assembly whole process testing equipment.

semiconductor process inspection: 3D, 2D inspection of manufacturing process appearance defects. Detection of wafer surface defects, debris, cracks, cutting cracks, etc.; packaging process (DB, WB) defective wafers, poor glue, poor bonding wires, poor solder balls, and debris and other defects detection.

LED chip packaging inspection: LED lamp bead packaging process fully automatic 2D, 3D appearance inspection, bad sorting, data statistics.Detection of LED chips, welding, less glue overflowing, gold wire leakage, sundries and dimensional errors, etc.

Downstream customers include: Apple, Xiaomi, Huawei, VIVO and other well-known companies or their machine vision equipment suppliers.

Competitors in this segment are: Telu Technology, Koh Young Tech, Omron, Jingce Electronics, Tianzhun Technology, Huaxing Yuanchuang, Saiteng Co., Ltd., Pioneer Intelligence, etc.

3D inspection equipment has a higher threshold and higher gross profit margin than 2D equipment. The company’s 3D AOI, 3D SPI and other high-end 3D testing equipment has achieved import substitution, and has been recognized by industry benchmark customers such as Pegatron, BYD, and BOE, and achieved revenue of 111 million yuan in the third quarter, a year-on-year increase of 30%.

The technical versatility of 3D AOI products is strong, and Juzi Technology is extending to downstream fields such as Mini LED, lithium battery, semiconductor, and medicine. In addition to the original 3C field, the company’s products have been successfully introduced into the mini LED industry. At the same time, the company’s research and development of high-speed tablet optical inspection equipment and semiconductor automatic optical inspection equipment is actively advancing, and the product technology is gradually mature. 3D AOI technology has a wide range of downstream applications. Relying on this technology platform, the company is expected to continue to expand into new industries and develop new products, thereby promoting performance growth.

Another business of Juzi Technology is control cable components, accounting for 38.52%, with a gross profit margin of 25.97%.

Products include: UL certified power cords, standard interface data transmission cables, signal and electrical connection harnesses, various customized interconnection harnesses, etc.

Major customers include financial equipment manufacturer NCR Group, Diebold Group, semiconductor equipment manufacturer Ultra Clean Group, etc.

This business came from the acquisition of Xinya Electronics in 2014.

The company’s control cable assembly products are mainly customized non-standard parts, with the characteristics of multiple varieties, small batches and multiple batches. Downstream mainly covers commercial/office, industrial, and automotive customers. Major competitors include Molex, Rapid

Manufacturing, greatlink, Xinbang Electronics (3023. TW), Weimao Electronics (833346. OC), Ruida (831274. OC), etc.

Obviously, although the market for this business is huge, the competition is fierce, the threshold is low, the gross profit margin is low, and the ROE is low. Competitor Ruida’s gross profit margin is 30%, net profit margin is around 8%, and ROE is less than 10%.

It can be seen that it is not a wise move for Juzi Technology to move from high-end machine vision equipment to low-end control cable assemblies, which greatly reduces the company’s profitability. Although the company claims synergies, most of the control cable assemblies are sold to others and only a few are used for their own use. In addition, the core components of machine vision are light sources, industrial cameras, lenses, etc. If these are produced in-house, the cost can be greatly reduced, but the control cable components account for a very small proportion of machine vision equipment, and it is easy to purchase from outside, which is completely unnecessary. self-produce.

However, this business is relatively stable. In the first half of 2020, revenue from control cable assemblies fell only slightly.

After the epidemic is over, with the resumption of factories and the increase in capital expenditure in the downstream consumer electronics industry, the market is expected to resume growth, and the performance of Juzi Technology is expected to recover, and there are still certain opportunities in the next few years.

In terms of valuation, since nearly half of the business is low-margin control cable components, this business is valued at a maximum of 20 times PE; in addition, the company’s accounts receivable account for a high proportion, the risk of bad debts is high, and bad debts are accrued. The ratio is low. Therefore, in general, the valuation of about 30 times PE is more reasonable.

However, if it is a long-term investment, this company is still quite worrying. On the one hand, from high-end products to low-end products, this strategy is relatively unsuccessful; on the other hand, the provision for bad debts is low, which is suspected of financial decoration. From these places, the management of the company is not very reliable.