Shennan Circuit (002916) 2019 Interim Report Performance Preview Comment: Full Capacity Utilization 5G Continues to Benefit
The company is a leader in the equipment PCB industry, benefiting from the explosive growth of 5G demand and domestic substitutes for substrates. The forecast performance in the first half of the year was slightly higher than expected.
The production capacity of high-speed boards and IC carriers has been released rhythmically, and performance growth is the foundation.
We maintain our “Buy” rating.
The rapid growth of 2019H1 performance slightly exceeded market expectations.
The company expects to realize net profit attributable to mothers in the first half of 2019, ranging from RMB 420.53 million to RMB 476.66 million, a year-on-year increase of 50?
70%, of which: Q1 1.
8.7 billion (60% year-on-year), Q2 is calculated based on the median2.
6.2 billion (60% year-on-year).
The company ‘s highest and sustained profit growth is mainly due to three reasons: (1) domestic 5G and Datacom have strong demand for large PCB boards; (2) the industry’s competitive improvement due to environmental protection requirements; (3) the company’s expanded production capacity drives revenue growth.
Looking forward to the future, we judge that the above trends will remain unchanged, and continue to benefit rigid board companies. Gross profit margin and net profit are expected to increase steadily.
5G sharing is leading, and it is expected that the volume will continue to increase in the second half of the year.
The company is a leader in the equipment PCB industry, sharing the number one in Huawei and the top three in Ericsson and Nokia. Capacity reserves, process accumulation and business cooperation constitute barriers to competition.
Overseas 5G deployment has continued to advance, and domestic 5G licenses have been implemented. At the end of June, Huawei’s 5G base station dispatch shipments were about 150,000, which is expected to increase to 500,000. Expect further increase in the second half.
The 5G single station PCB usage has increased significantly, and the proportion of multiple high-speed boards has increased. We gradually increased the 5G PCB ASP ratio to 4G by more than 50%. Due to the increase in process defects, the gross profit margin can be improved.
We judge that the domestic 5G progress is basically not affected by trade frictions. Huawei’s new 5G base station PCB has begun to gradually break through and be transformed into 2020?
The number of 5G stations will climb rapidly in 2022, and the company will clearly benefit.
The construction of the second phase of Nantong was started to increase the layout of the high-speed field.
The company’s high-level Shenzhen, Wuxi PCB production capacity is 1.4 million square meters; Nantong Phase I project design capacity is 340,000 square meters, the actual production of 400,000 square meters.
The company plans to issue convertible debt to build the second phase of Nantong. We estimate that the planned production capacity is 50?
600,000 square meters, is expected to start production in 2020H2, when the full production capacity will reach 2.4 million square meters.
In addition, the company continues to tap the production capacity through technological transformation.
Its Nantong project is mainly aimed at high-speed and high-density multi-layer PCBs, and through cumulative climbing, it will drive output value and realize gross profit.
The Wuxi plant started production, and ceramic substrate revenue is expected to continue to grow.
The company plans to build a new factory in Wuxi to improve its packaging substrate capabilities. The domestic substitution is expected to accelerate. It will use the state-owned background and the nearest response capability to preferentially introduce orders from domestic storage plants.
At present, the Wuxi plant is preparing for production. The climbing period is 1?
In 2 years, the designed production capacity will be 600,000 square meters, which will help to double the revenue of the substrate business. It is expected that the profit and loss will be balanced in the second half of 2020.
Risk factors: 5G base station construction is less than expected; new capacity climbs higher than expected; package substrate prices fluctuate.
Profit forecast and estimation.
The company is a leader in the equipment PCB industry, benefiting from the explosion of 5G demand and domestic substitutes for substrates, generating a rhythmic release of the basis for productivity growth.
Considering that the maximum production capacity exceeds expectations, the increase in 2019?
Net profit forecast for 2021 is 9.
28 trillion (previous forecast was 8.
RMB 790,000, a change of 7.
4% / 9.
8% / 3.
3%), corresponding to an EPS of 2 after the capital increase.
Considering the leading premium, give 45x PE in 2019 with a target price of 126.
40 yuan, maintain “Buy” rating.