Company Profile

Suzhou Victory Precision Manufacture Co., Ltd. researches and develops, designs, produces, and sellsprecision mechanical modules for TV manufacturers in China and internationally. Its products includeTV stands, TV front bezels and back covers, and notebooks. The company was founded in 2003 and isheadquartered in Suzhou, China. (Source: Bloomberg)

Events

Company’s private placement scheme received CSRC’s approval. The scheme shows Suzhou Victory(the company) will issue no more than 727,272,726 new shares privately to generate no more thanCNY 4.3 billion. CNY 2.5 billion of the raised fund is committed to company’s capacity expansionprogram of intelligent terminal equipment, CNY 800 million is committed to setting up intelligentmanufacture platform and CNY 1 billion will be used in replenish company’s working capital.

Comments

The company is developing 3C automation with KUKA. IPhone 7 will drive up the sales of company’ssubsidiary in H216.

Apple will release iPhone 7 in this September, which we expect will make about 200 million salesvolume. iPhone 7’s new function of dustproof and waterproof shall increase the phone’s popularity.One of company’s subsidiary is one major supplier of iPhone’s dustproof/ waterproof testingequipment, it has post fast growing sales throughout the year. The company has also forgedpartnership with international robot giant KUKA to access its advanced technologies in developing 3Cautomation.

Earnings forecast and investment grading:

Suzhou Victory, via M&A expansions, has upgraded itself from a mechanical module manufacturer toan integrated intelligent manufacture service provider. Benefited by the synergy effect of company’sprior M&As, the company’s sales revenue surged 403.52% YoY to CNY 7.2 billion, its shareholderattributable net profit jumped 327.66% to CNY 411 million for H116. We believe the company canmaintain the vigorous growth and we maintain “Buy” rating for it. We estimate the company toregister net profit for year 2016/2017/2018 at CNY 1.1 Bn/1.6 Bn/2.2 Bn with a diluted EPS of CNY0.34/0.51/0.7. The implied P/E ratios are 29.9x/20.3x/14.7x respectively.

Potential risk: down-stream’s demand may decline and the policy subsidy may be weaker-thanexpected.