The 21-year net profit of homing decreased by 38.31%, maintaining the "overweight" rating.

In 21 years, the company achieved revenue of 556 million yuan (yoy-16.95%) and net profit of 14 million yuan (yoy-38.31%), which was lower than we had expected, mainly due to the decline in production and sales of some products. According to the company's 22-year production plan, we downgrade the production and marketing forecast of related products, and expect the company's 22-24 year net profit to be 0.27 billion RMB 0.37 billion (the previous value is 0.66 won-80 million RMB). Using the segment valuation method, in view of the fact that the germanium price has returned to the 12Q2/18Q1 level, the average PB of the two-stage company is 5.38pm 5.43, and the average value of both is given to the germanium resources business PB5.41X. Considering that the assets of germanium components and semiconductor materials are relatively light, the corresponding market value of germanium resources is estimated approximately by using BPS2.29 element predicted by the company for 22 years, about 8.091 billion yuan. The 22-year net profit of germanium components and semiconductor materials is 0.16x0.09 million yuan. According to the average expected value of Wind (22e) of comparable companies, PE (22e) is given 45.8X, corresponding to a market capitalization of 728 million yuan, the total market capitalization is 8.819 billion yuan, the target price is 13.50 yuan (the previous value is 15.15 yuan), maintaining the overweight rating.

The decrease in revenue was mainly due to the decrease in trade business, and the overall production and sales of main products increased compared with the same period last year.

In 21 years, operating income decreased by 16.95% compared with the same period last year, mainly due to a decrease in trade business. Converted into material-grade germanium products (including germanium metal content), the 21-year production and sales are + 17% and 27% respectively compared with the same period last year. From a product point of view, the production and sales of material-grade germanium products increased year on year due to the growth of market demand; the output of photovoltaic grade germanium products was-30% year-on-year, mainly due to the postponement of the procurement plan of individual major customers, and the delivery time was delayed; the sales volume of infrared grade germanium products was-42% compared with the same period last year, mainly due to the short-term surge of orders caused by the epidemic in the past 20 years, and gradually dropped as the epidemic alleviated; the sales volume of light-grade germanium products was + 42% year-on-year, mainly due to the pick-up in market demand. The sales volume of compound semiconductor materials is-54% compared with the same period last year, mainly due to the adjustment of product structure, from LED level to high-end semi-insulation and low dislocation level, product transformation and upgrading process, long cycle of market development and customer verification, and small order volume.

The decline of germanium ore grade affects the company's profits, and the transformation and upgrading in the future is still worth looking forward to.

The decline in the company's operating costs in the past 21 years is also due to the decrease in trade business, but due to the change in the geological grade of germanium ore, the "integration of the two mines" has not yet been completed and other factors, resulting in the decline of ore grade and the company's cost is also affected. Profit indicators are lower than in the past 20 years. But at the same time, the company realized the turnaround of some subsidiaries in the same period, and the quality rate index of gallium arsenide wafer and indium phosphide wafer improved significantly, so it is still worth looking forward to the future business transformation and upgrading of the company. From the 22-year production and operation plan of the company, the output of photovoltaic germanium products is expected to be + 20% year-on-year, mainly to meet customer demand; gallium arsenide wafer (high-grade low dislocation, semi-insulating) output + 45% year-on-year, mainly to increase the production of large-size products; indium phosphide production increased by + 36%, mainly with the promotion of mass supply of products to customers, sales of large-size products are expected to increase.

Risk tips: production and sales are not as expected and downstream demand is not as expected.