Shengyi Technology (600183) Interim Review: Growth Exceeds Expectations, Overweight Shows Ambitions
Event: On August 12, the company released its semi-annual report, and achieved operating income of 59 in the first half of 2019.
73 ppm, an increase of 2 per year.
85%, realizing net profit attributable to mother 6.
29 ppm, an increase of 18 years.
02%, the net profit of non-attributed mothers is reduced by 5.
92 ppm, an increase of 22 in ten years.
Investment points: Copper clad sheet + prepreg: affected by the price of raw materials, the income has shifted slightly, and profitability has increased significantly.
In the first half of this year, the sales area of the company’s copper-clad laminates and prepregs increased at the same time compared with the same period of last year. However, because the prices of the main raw materials (copper foil and fiberglass cloth) of the current copper-clad laminates are lower than the same period of last year, the company’s products are under pressureAs a result, the company’s revenue from this business has decreased. In 2019H1, the company’s copper clad laminates and prepregs contributed revenue 46.
3.9 billion, a decline of 2 every year.
32%, of course, also because of the price reduction of raw materials, the company’s profitability of copper clad laminates and prepregs has improved significantly. The gross profit margin of this business in 2019H1 increased by 4 compared with the same period last year.
To reach 22.
In the previous company’s in-depth report, we have already sorted out the past changes in China’s communications system that have helped the company’s copper laminate production capacity. In the second half of this year, 5G construction has gradually entered a peak period. At the same time, Shaanxi Shengyi cashed in the second half.Expansion of the production capacity of 4.2 million square meters per year of copper clad laminates, Jiangxi Shengyi Phase I (12 million square meters per year) is also expected to be put into production in the first quarter of 2020. The company has arrived at a new stage of high growth in copper clad laminates and prepregs.
Printed circuit boards: Revenue and profits have increased significantly. Benefiting from 5G is expected to usher in new growth.
Although the sales area of the subsidiary Shengyi Electronics PCB decreased (463.
620,000 feet / -15.
46%), but operating income increased significantly (12.
$ 8.3 billion / +28.
04%), profitability has also been significantly improved, and gross profit margin reached 32.
73%, an increase of 9 compared with the same period last year.
In terms of production capacity, as of 2018, Shengyi Electronics must increase PCB production capacity by about 13 million feet / year (about 120 square meters / year), which is expected to increase by about 30% this year. Currently, it has planned to invest in Ji’an to expand production, with a phase of 700,000 square meters.Annual production capacity, construction period is two years.
Like copper clad laminates, 5G construction will provide a clear impetus for the company’s new PCB production capacity. At the same time, it will gradually increase the average price and profitability of PCB products. In the next two years, the PCB business will promote the company’s overall performance flexibility.
High-frequency copper clad laminates: gradually entering the capacity phase, and is expected to become the main force of domestic substitution.
The company has mastered the production process of hydrocarbon copper clad laminates through self-developed methods. By purchasing a full set of processes, technologies and equipment solutions from Japan’s ZTE Corporation, it has obtained the physical energy for the preparation of PTFE products.
The subsidiary Jiangsu Shengyi is mainly responsible for the production and preparation of high-frequency boards. It has been put into production in 6 months. It is currently in the ramp-up phase of production capacity. If the subsequent progress goes smoothly, it will open up new growth space for the company.
At present, the global PTFE market is almost monopolized by Rogers. Considering the US export restrictions on Huawei, the replacement of PTFE copper clad laminates is expected to become the future in the case of improved product quality. 2?
In the three-year trend, the company’s planned 重庆耍耍网 PTFE production capacity far exceeds other domestic counterparts, and it is expected to fully benefit in the future.
Earnings forecast and investment rating: Maintain Buy rating.
The construction of 5G base stations will drive the demand for copper-clad laminates, prepregs and PCBs, and supplementary production capacity (Jiangxi Shengyi, Jiangsu Shengyi Special Materials, Ji’an PCB projects) will be successively launched, which will form the most direct driving force for the company’s revenue and performance growth.Effect, we expect the company’s net profit for 2019-2021 will be 12 respectively.
02 billion, 14.
4.1 billion and 16.
88 trillion, the current sustainable corresponding PE is 41.
80 and 29.
72 times. Considering the company’s leading position in the field of copper clad laminates and the possibility of further growth in future performance, we maintain the Buy rating.
Risk reminders: (1) Rising upstream raw material prices reduce the company’s profitability; (2) 5G base station construction progress is less than expected; (3) PTFE capacity climbs less than expected.