I. Overview of events
Recently, Huaying Technology released a report on March 2017 revenue: the consolidated revenue in March was 353.2191 million yuan, of which module-related business revenue was 352.6552 million yuan, cover glass business revenue was 563800 yuan; consolidated revenue in the first quarter of 2017 was 1.0469161 billion yuan, of which module-related business revenue was 104555.05 million yuan, cover glass business revenue was 136.56 million yuan.
II. Analysis and judgment
2017Q1 module-related business is picking up, and the second phase of the cover glass project is speeding up production. 1. The total revenue of 17Q1 increased 1.76% compared with the same period last year, of which: module-related business 17Q1 revenue was 1.046 billion yuan, an increase of 2.5% in March compared with the same period last year. 17Q1 revenue of cover glass business decreased by 84.46% in March compared with the same period last year, and increased by 30.21% in March compared with the same month last year.
Since 2016, the company began to strategically adjust the module production line, optimize capacity allocation, strategically shrink small and medium-sized module factories, focus on high gross profit margin products, and further optimize the product structure. The kiln of the first 5.5 generation line of the second phase of the Corrivision cover glass project was ignited in September 2016 and began to lead the plate in March this year. It is currently in the stage of debugging the equipment, and the company will formally pick up the plate as soon as possible.
3. We believe that the company's LCD module related business begins to pick up, as the product structure continues to be optimized towards high gross profit, and the vehicle instrument switches to liquid crystal display, the company's LCD module related product business will continue to improve.
With the commissioning of the second phase of the project and the improvement of yield, the cover glass business is expected to turn losses into profits in the future.
To reiterate the point of view: the sixth generation TFT-LCD production line successfully lit the first screen, the production line is about to mass production 1, Hua Jiacai sixth generation TFT-LCD production line project the first 5.2 inch product has been lit successfully on March 31, 2017, the follow-up products will be mass production after customer certification. The project plans to invest 12 billion yuan to mainly produce glass substrates using IGZO technology TFT-LCD, the size of which is 1500mm × 1850mm, with a design capacity of 30,000 pieces per month, and is scheduled for mass production in the second half of this year. The production line is mainly small and medium-sized liquid crystal displays, and its applications include high-end smartphones, tablet computers, vehicle displays, industrial control displays and so on.
2. We believe that the sixth generation TFT-LCD production line project has excellent performance, high performance-to-price ratio and strong downstream market demand, which will successfully expand customers and become a new profit growth point with the gradual climbing of production capacity.
Optimize TFT-LCD technology, reserve AMOLED, flexible display new technology 1. Compared with traditional a-Si technology, IGZO technology can reduce signal line and crystal volume in pixels of the same size, thereby improving TFT opening rate, and can provide higher resolution and higher screen brightness under the condition of the same size; TFT with IGZO technology also has less leakage current and more power-saving screen. According to the strategic plan, the company plans to invest RMB 2.55 billion in 2019 to carry out industrial technological innovation research, with the direction of advanced display technology, intelligent systems and so on.
2. We believe that with the process optimization and yield improvement, TFT-LCD will still be one of the mainstream technologies in the display field in the future. The company will strategic reserve AMOLED, flexible display and other high and new technologies, enhance the company's independent innovation capability in the field of display technology and intelligent systems, shorten the new product R & D cycle, and promote the company's business transformation and upgrading.
Third, profit forecast and investment suggestions
It is estimated that the EPS of the company from 2017 to 2019 is 0.24,0.38,0.52 yuan respectively. Taking into account the dilution of the additional issuance and the impact of the commissioning of the sixth generation TFT-LCD production line project, the company can be given 50-55 times PE in 2017, with a reasonable valuation of 12.0-13.2 yuan in the next 6 months, maintaining the company's "cautious recommendation" rating.
Fourth, risk tips:
1, the production capacity is not as expected; 2, the construction progress of the project is not as expected; 3, it shows that the market competition is intensified.
