Main points of investment:
Endogenous epitaxy contributes to rapid growth
The company has PCB+PCBA (SMT) + whole machine assembly one-stop business process service, and can produce samples, small batch boards, medium batch boards, mass measuring boards and other products of various sizes according to customer needs, and has a strong customer customization service ability. In recent years, on the one hand, the company has continuously improved its profitability through internal production line upgrading and product expansion; on the other hand, through epitaxial mergers and acquisitions, it will further enhance its high-end PCB technology capabilities and capacity scale. We believe that the company's performance inflection point has reached and is expected to usher in a period of rapid development.
Optimization of hard board product structure and improvement of profitability
Through the acquisition of Mutailai, the company's hard board product structure is further optimized, gradually expanding from a large number of measuring plates to templates, small batch boards and medium batch boards to ensure that it can respond to the diversified needs of customers. At present, the introduction of batch customers in the Huizhou production line is gradually effective, and it has turned losses into profits in 2021Q1; in addition, with the improvement of production efficiency and capacity utilization of Longnan intelligent factory, the company's original business income scale is expected to grow steadily.
Proposed acquisition of Hong Kong Sumitomo Electric to strengthen the competitiveness of high-end FPC
The company has become a leading domestic FPC manufacturer, positioned in the high-end multilayer panels in the consumer electronics field, and is expected to fully benefit from the rapid growth of the wearable device market in the future. At the same time, the company plans to acquire the FPC business of Sumitomo Electric in Hong Kong, which is the top four FPC supplier in the world (with revenue of 2.16 billion yuan in 2019). The acquisition will help to further enhance the company's comprehensive competitiveness in the FPC field, and is expected to achieve synergy of the main business and rapid growth of performance.
Profit Forecast and Investment suggestion
It is estimated that the company's revenue from 2021 to 2023 will be 2.7 billion yuan / 3.47 billion yuan / 4.35 billion yuan respectively, an increase of 31% to 29% peg 25% over the same period last year, and the net profit to its parent is 233 million yuan / 317 million yuan / 413 million yuan, an increase of 95%, 36% and 30% respectively over the same period last year, corresponding to 20x15x12x PE. The comprehensive industry gives the company an average valuation of 22x PE in 2021, corresponding to the target price of 23.1 yuan, and is given the rating of "increasing holdings" for the first time.
Risk Tips:
1) the lower-than-expected risk of downstream demand; 2) the risk of decline in profitability caused by fluctuations in raw material prices; and 3) the risk of impairment of goodwill caused by lower-than-expected acquisition integration.