The non-public offering plan targets a batch of high-end PCBs, and strategic transformation is progressing steadily, maintaining the “purchase” rating companies announcing plans for the non-public offering of shares, raising 2 billion yuan to invest in the new circuit board project of Zhuhai Chongda Circuit Technology Co., Ltd. (Phase II). The number of shares to be publicly issued this time does not exceed 262 million shares (including capital), and the total share capital is expected to increase to 1.14 billion shares. Jiang Xuefei and Zhu Xuehua are still the actual controllers of the company, with a total shareholding ratio of no less than 48.6%. We maintain our previous profit forecast. We expect the company's revenue to be 62.1/75.4/8.63 billion yuan in 2021-2023, net profit of 6.5/8.5/1.04 billion yuan, corresponding to EPS of 0.74/0.97/1.18 and PE of 18.1/13.8/11.3 times, maintaining the “buy” rating.
The Zhuhai plant is the main plant area for subsequent production capacity release. Adequate customer reserves lay the foundation for the market. The new circuit board project of Chongda in Zhuhai uses a phased construction method, with an annual design capacity of 6.4 million square meters. It is planned to be carried out in three phases. It is the company's main project to expand production at present. The first phase of the construction project of the Zhuhai plant was officially put into trial production in 2021Q2, focusing on the development of optoelectronic, automotive and computer PCB products. This private offering is the second phase of the project. The construction period is 24 months. After delivery, it is expected to add 1.08 million square meters of high multi-layer board and 420,000 square meters of HDI board per year. In the past, the company was constrained by small to medium batch orders. Production capacity and space were relatively limited, and production capacity for mass production of high-end PCBs was lacking. It is expected that after expanding production at the Zhuhai plant, it will further increase the production capacity of high-multilayer boards and HDI boards, improve the product structure and enhance market competitiveness. The Zhuhai Phase II plant will further meet the needs of major customers in the industry and incubate existing customer orders.
Breaking out of the small to medium PCB niche market ushered in a reversal of the difficult situation
The company gradually broke out of the small to medium PCB niche market, adopted a large customer strategy, and actively expanded the domestic market.
In the transformation process, the company overcame the two major problems of shifting its business strategy from being technology-driven to cost-driven and direct sales customer reserves, and ushered in an inflection point in the 2021Q3 single-quarter performance. The company has experience with high-end customized orders for small to medium batches, and is expected to further expand its processing capabilities to the medium to high volume markets. It is expected that it will benefit from market growth brought about by the iteration of communication server products. The company's HDI and IC carrier products all have a layout, which may benefit from the trend of higher PCB density brought about by chip upgrades and the wave of localized replacement of IC packaging substrates.
Risk warning: Higher prices of raw materials erode costs, downstream demand falls short of expectations, and yield of high-layer PCBs falls short of expectations.