Shengyi Technology (600183): The downstream of the card communication circuit board welcomes a new round of high growth

Shengyi Technology (600183): The downstream of the card communication circuit board welcomes a new round of high growth

Since 2016, the experience of Shengyi Technology has experienced the profit-driven phase brought by the continuous increase in prices of copper-clad laminates, and the expected driving phase that has achieved high-frequency and high-speed import substitution of communications since the beginning of 18 years.In the second quarter, the off-season profitability and performance exceeded expectations, meaning that a new round of high-profit growth driven by the high-speed communications business has begun. This is the deep integration of the growth logic behind the company’s card-bit communication circuit.

We raise our profit forecast and maintain a highly recommended level with a first target price of 20 yuan.

Traditional CCL: Communication boom of high-speed orders + cost reduction to increase gross profit.

Since the second quarter of 2019, it has benefited from the overall boom in downstream communications demand. 5G construction has accelerated, and the company’s high-speed CCL product orders are full, and orders have exceeded the company’s overall production capacity.

5G equipment has increased the use of high-speed CCL compared to 4G, and the value of high-speed CCL is 1 higher than that of ordinary FR-4.

5-2.

5 times, profitability, competition is better than ordinary CCL, and there is demand for import substitution, and it is expected to continue to drive performance growth in the medium and long term.

In addition, the company has shifted some bargaining prices upstream to reduce the pressure on some common products, and FCCL also realized a one-month loss.

From a historical perspective, the company has a higher probability of achieving its initial business goals, and its management efficiency is at its best.

High-frequency CCL: Import substitution is accelerating, and production capacity release brings profit elasticity.

Since 19 years, catalyzed by factors such as external trade frictions, the company’s high-frequency CCL products have been in a state of supply and demand substitution.

This product has accumulated early research and development, customer resources, and brand share are ahead of domestic counterparts, and it is ahead of foreign companies in product delivery and supporting service response.

At present, dozens of models have partially covered Rogers. For example, GF220 thermoplastic polytetrafluoroethylene and S7136H thermosetting hydrocarbon ceramics can be used for Rogers 3 Series and 4 Series respectively.The Nantong project has been connected for trial production. The annual production capacity of the first phase is 1 million square meters. End customers include Huawei, ZTE, Ericsson, etc. It is expected that the digestion of new production capacity will occur smoothly.

PCB business: The cumulative demand for demand is released, and high growth is expected to continue.

The subsidiary Shengyi Electronics 19H1 expects revenue to increase by 35% + and net profit to be approximately 1.

600 million, an annual increase of about 100%, is one of the reasons why the company’s performance exceeded expectations.

Shengyi’s customers include Huawei, ZTE, Nokia, Samsung, Fiberhome, etc. 40% -50% of its revenue comes from Huawei and ZTE. It is a supplier 杭州夜生活网 with Shennan and Hudian, and has been receiving Huawei supply for 4 consecutive years.Top supplier awards, Samsung, Inspur and other core supplier awards.

In the past 5 years, Shengyi Electronic’s revenue has grown at a compound rate of 15%, and there is still room for price and leading level to improve. The gross profit margin is nearly doubled, which is in a trend of benign optimization.

In the subsequent third phase of Dongcheng, Jiangxi Ji’an’s new production capacity was released to meet the downstream demand boom, and its performance continued to grow.

Maintain “Highly Recommended-A” investment rating, target price is 20 yuan.

We believe that it will become a new core driving force for the company’s performance in the communications business. At the same time, it will combine FCCL’s profit increase, cost reduction measures, staff downsizing and internal incentives to optimize management efficiency. The company’s 19-year performance will exceed the market’s optimistic expectations, and 20-year new capacity release will promoteIn response to the accelerated growth, the medium and long-term market share continues to increase, and the continued layout of advanced materials further raises expectations.

We raise the company’s revenue forecast for 2019-2021 to 130.14 / 178 billion and return net profit to 12.

86/16.

24/19.

6.4 billion (considering amortization of three-year equity incentive expenses), the corresponding EPS is zero.

61/0.

77/0.

93 yuan, corresponding to the current total PE of 24.

9/19.

7/16.

3 times, maintain “Highly Recommended-A” rating, and give target price of 20 yuan.

Risk warning: industry demand is lower than expected, 5G exceeds expectations, and industry competition is intensifying.