Industry leading PCB supplier in the field of digital communication, expanding production to provide performance increment. Shengyi Electronics was founded in 1985 and listed by Shengyi Technology, a leading domestic laminate manufacturer. The company locates in the high-end application field, the product is mainly used in the communication equipment / network equipment / server and other fields, the technical strength is leading in the industry, and has been successfully introduced into the industry's leading customers. The company generated 3.634 billion revenue in 2020, and yoy+17.35%, returned to its mother with a net profit of 439 million yuan, yoy-0.44%. 21H1 affected by the rise in raw material prices and weak downstream communication demand, the company's 21H1 revenue is 1.689 billion, yoy-11.41%, homing net profit is 129 million, yoy-56.59%. With the release of self-financing + IPO investment projects one after another, it is estimated that the annual production capacity will be increased by 15.5 million square meters in 21-22-23, and the expansion will contribute to the increment of performance.
Positioning in the high-end plate, technical barriers and customer certification threshold is high, the product has the core competitiveness. The company's main products communication equipment board / network equipment board / server board have high requirements for product performance, stability and reliability, mostly multi-layer boards and high-frequency high-speed boards, and usually need to use special processing technology to meet specific performance requirements. The overall technical threshold is high. Communication equipment / network equipment / server industry concentration is high, customer certification threshold is high, the company's products have been successfully introduced into relevant enterprises, customers include Huawei, ZTE Kangxun, Samsung Electronics, IBM, Wave Information, FiberHome Communications, Nokia and other well-known enterprises in the industry, the technical strength has been recognized by major customers in the industry, and the products have competitive advantages, while also providing effective support for the company's capacity digestion after production expansion.
Domestic 5G base station construction recovered in the second half of the year, and 5G construction is optimistic in the medium and long term. In the first half of the year, due to the influence of Sino-US trade friction, 5G construction rhythm adjustment, lack of core and other factors, the domestic 5G construction slowed down obviously. Recently, the main equipment of China Radio and Television + China Mobile Limited 700MHz and China Unicom + China Telecom Corporation 2.1G base stations has been concentrated on the ground, and the second half of the year has entered a small peak of 5G construction. In the medium and long term, there is a lot of room for improvement in the construction of 5G base stations, with 1.56 million in China, 175000 in Japan, 500000 in the United States, and 109000 in South Korea to be built, and we are optimistic about the resumption of overseas 5G base station construction in the post-epidemic era. The continuous promotion of 5G SA construction + 5G distributed sinking deployment has led to the rapid growth of 5G core network market, which is expected to increase to US $8.4 billion by 2024, with a compound annual growth rate of about 313%. 5G construction space is huge.
Increase in data center capital expenditure + server platform upgrade to enhance the PCB market space for servers and network equipment. The continuous expansion of the cloud computing market, increased capital expenditure in data centers, and increased investment expenditure on network equipment and servers have led to an increase in network equipment and server shipments. Server shipments are expected to be 5-6% CAGR in 2021-2024 and can reach 14.18 million units in 2024. Server platform upgrade stimulates upgrading demand, corresponding to PCB material upgrade + layer increase + process complexity increase, single terminal value increases by 20-30%. The market size of server PCB is expected to be US $54-6.1 billion in 2024 and 10% of CAGR in 2020-2024.
Investment advice: the company's 22-year net profit is expected to be 374 million yuan, 548 million yuan respectively, and yoy-14.90%/+46.49%, gives the company 25 times PE in 22 years, corresponding to a target price of 16.5 yuan per share, giving a "buy" rating for the first time.
Risk hints: 5G base station construction + core network construction is not as expected, network equipment board, server / computer board, industrial control / medical board, consumer electronics board shipment is not as expected, raw material price fluctuations affect the company's profitability, capacity construction progress is not as expected, the impact of the epidemic is not as expected.