The Zhitong Finance App learned that CITIC Securities released a research report stating that it maintains the “increase in holdings” rating of Jiantao Laminate (01888). Based on 2022 results, considering that short-term demand in the PCB business is suppressed due to fluctuations in macro factors, the performance will be pressured to a certain extent, adjusting the 2023/24 net profit forecast to HK$2,33/28 billion, adding a net profit forecast of HK$3.48 billion for 2025, with a target price of HK$9. It is recommended to continue to pay attention. The company is the world leader in copper-coated plates, and its performance has maintained steady growth over a long period of history. Demand picked up in 2023. The company has a prominent leading position in the copper-coated plate field and has the advantage of vertical integration in the industrial chain. It is expected that it will continue to expand production capacity and optimize the product structure in the future, which is expected to further open up room for growth.
The main views of CITIC Securities are as follows:
The 2022 results were under pressure, and the volume and price of copper-coated plates dropped sharply.
The company achieved revenue of HK$22.364 billion in 2022, -22.3% year on year; achieved net profit of HK$1,909 million, -71.8% year on year; gross profit margin of 22.8%, year-on-year - 11.2pcts, net profit margin 8.5%, year-on-year - 15pcts. The decline in the company's performance was mainly due to the background of overseas inflation and weak demand in the downstream electronics industry, which led to a sharp drop in the volume and price of copper-clad plates. On the cost side, the company's sales/management/finance expenses ratio in 2022 was 2.3%/4.2%/0.6%, respectively, which was +0.5/+0.9/+0.3pct compared to +0.5/+0.9/+0.3pct. Looking at 202H2, the company's performance declined further, with revenue of HK$9.2 billion, -38.3% yoy, -30.3% month-on-month; net profit of the mother was HK$83 million, -97.6% YoY, and -95.4% month-on-month.
By business, the performance of the core business copper-coated plates and upstream raw materials increased rapidly over the same period last year.
1) Copper clad business: Revenue of HK$13.99 billion in 2022, accounting for 62.5%, or -39.3% year on year; this includes epoxy glass fiber copper-clad sheets (revenue of HK$12.44 billion, accounting for 55.6%, -40.2% year-on-year) and paper-coated copper sheets (revenue of HK$1.54 billion, accounting for 6.9% compared to the same period last year). Prices of raw materials such as copper foil and epoxy resin bottomed down during the year, leading to price adjustments for copper cladding sheets, which also strengthened downstream customers' expectations for price reductions to a certain extent. 2) Upstream materials business: Revenue in 2022 was HK$4.04 billion, accounting for 18%, +4.6% year on year. Although product prices were under pressure, the company continued to actively expand material production capacity during the year, including glass wire, glass cloth and copper foil. 3) Other business: Revenue in 2022 was HK$4.34 billion, accounting for 19.4%, +127.7% year on year, mainly due to increased residential delivery volume. Property sales recorded revenue of HK$3.17 billion, +339% year on year.
In the short term, the price of copper-clad plates is still at the bottom, and performance may be under pressure; in the long run, the company's leading position is remarkable, has the advantage of vertical integration, and is resilient to cross the bottom of the cycle.
According to the company's annual report, in the first two months of 2023, the inventory flow rate of copper-coated plates and upstream materials was slow and the unit price of the product fell. Therefore, we estimate that the company's short-term performance may be under pressure. In the long run, the company has maintained the highest share of copper-clad plates in the world for 15 consecutive years, with a prominent leading position; and has accumulated more than 30 years of operating experience in vertically integrating the industrial chain of copper-coated panels and upstream materials, which is expected to further improve production efficiency through a modern manufacturing system. In terms of production capacity and upstream materials, the company's new copper-clad plant in Shaoguan has been fully put into operation. According to the company announcement, the company will increase glass wire production capacity by 4,200 tons/month and copper foil production capacity by 1,050 tons/month in Lianzhou in 2022, Shaoguan will increase glass cloth production capacity by 13 million meters/month. The company also plans to further increase copper foil production capacity by 750 tons/month in Lianzhou in the first half of 2023. In the future, the company is also expected to set up production capacity in Thailand to meet the needs of overseas customers, and accelerate the structural upgrade to high-value-added copper-coated plate products such as thin plates, high-frequency, high-speed, and halogen-free plates, which is expected to drive performance to another level.
Risk Factors:The price of copper-clad plates fell sharply; downstream demand fell short of expectations; raw material prices fluctuated; market competition intensified; the company's new product sales fell short of expectations; the company's production capacity climbed and technological upgrades fell short of expectations, etc.