Main points of investment:
Understanding of the company and prospects for future performance flexibility.
The comprehensive layout of the production line to create an one-stop service moat. Founded in 2003, the company first started manufacturing mobile phone cover glass in Taizhou. With the decline of customers such as Nokia and Motorola, the company's performance is under pressure. In 2013 and 2015, the company changed direction to acquire Shenyue Optoelectronics, Shenzhen Lianmao extended to the field of touch screen, CNC precision structure manufacturing, and customers gradually expanded to Samsung, Huawei, Coolpad, XIAOMI and other risk diversification. In September, 16, it was proposed to add 2.34 billion yuan to the layout of automotive electronics and other new modules, fingerprint recognition modules, 3D glass, etc., forming the only domestic manufacturer with the integrated service capability of "display panel + touch panel + fingerprint identification + 3D curved surface glass + pressure sensing module + curved surface display + metal CNC bracket" based on full-fitting technology. At the same time, we believe that the company's business model is also more in line with the current trend of supply chain integration of mobile phone terminals such as Apple Inc and Huawei, so as to build a moat for the company in the competition of homogeneous manufacturers.
The company's performance has significantly benefited from the growth of the industry. We judge that there is still a lot of flexibility in the company's performance in the next few years. First, the company proposes to add 2.34 billion yuan to build a new touch display integrated module, fingerprint identification module, metal CNC precision structure, etc. (the actual controller Ye Xianyu subscribes to no less than 20%). According to the company's estimated annual revenue increase of nearly 4.5 billion and 287 million profit, the project is one step away from the 10 billion revenue scale after it is fully put into production. Second, the company's integrated smartphone service technology can be moved to automotive electronics (Audi, Mercedes-Benz, BMW), VR equipment (HTC structural components), wearable (Huawei bracelet) and other intelligent terminal devices have initial orders, the follow-up market demand space is larger; third, the combination of 3D glass cover and OLED display module revolutionary innovative products will have greater demand for the company's 3D glass and metal CNC business.
Opportunities brought to the company by the development of the industry.
Three years of industry development: judging from the changing course of smartphones, smartphones have experienced initial development (01-03), market rise (04-06), market explosion (07-10) and steady market growth (10-today). Under the background of reduced product dividend and saturated market demand The supply-side innovation such as the function and experiential appearance of the mobile phone has become the focus of the next new consumer group and the new consumer era. We believe that following the innovation logic driven successively from "function satisfaction-experience upgrade-ecological construction-personality configuration", the current stage is from near to far, first of all, the innovation of AOLED flexible display, 3D glass, wireless charging and other appearance experience upgrading. The emergence of 16 years of Samsung GALAXY Note 7, Huawei Mate 9 Pro, Vivo Xplay6 and other high-end phones has become the focus of the market, while Apple Inc, who regards innovation as his life, 16 years of stagnation or 18 years of innovation, we believe that the next 17-18-19 will be the year of reshaping the smartphone market.
With the rise of domestic mobile phones, the penetration of the middle and high-end market has accelerated. The statistical sales of state-owned mobile phones in the third quarter of 2016 was 115 million, an increase of 5.8% over the third quarter of 2015. Domestic mobile phones OPPO, VIVO, Huawei and XIAOMI surpassed Apple Inc and Samsung in the top four. The wave of replacement of domestic mobile phones has won the competition from scale and mass to product differentiation. On the other hand, with technology-driven, cost reduction and consumption upgrading, micro-innovations such as 3D glass will increasingly appear in middle and high-end mobile phones. We predict that with the breakthrough of core hot standby technology and cost such as hot bender and sculpture machine in 17 years, and the penetration of OLED, 2018 will become the explosive year of 3D cover plate, when the penetration rate of 3D glass panel mobile phone will exceed 50%. And the standard market space of "OLED+3D glass + wireless charging + metal frame" is expected to be hundreds of billions of dollars.
Concerns and concerns of the market:
What is the company's advantage in 3D glass? We believe that it is mainly based on the company's long-term technology accumulation and laminating process support, the company has been focused on the field of cover glass, and has begun to research and develop 3D cover glass in 2009, the key process hot bending technology and its supporting processing technology. at present, the company has a complete 3D cover glass-related process technology, the yield is above the median level of 30-40 market. What the market ignores is that the company's mature laminating process will play a key role in the airtightness quality of the follow-up key processes such as AMOLED and 3D glass lamination.
Shenzhen Lianmao 16-year commitment to gambling performance can be fulfilled? During the 15-year acquisition, Shenzhen Lianmao promised to deduct the non-net profit of 1.51.5 / 216 million in 15-16-17, with a compound growth rate of 20%. Due to the layout and R & D needs of new customers such as Huawei, production was released later in 2014 and the smart terminal market entered a saturation period in 2015. the company's performance is only 80%. From the perspective of 16Q3, it seems that less than half of the performance commitments have been fulfilled. We believe that with the development of the metal processing business of Shenzhen Ruiding Manufacturing Co., Ltd., a subsidiary of Shenzhen Lianmao, and the expansion of its own production capacity (currently full capacity), the company achieved a major breakthrough in the fourth quarter compared with the same period last year.
Profit forecast: based on the one-stop service capability of "Touch display + fingerprint Identification + CNC Metal processing + fitting" built by the company after it is put into production, and the 3D glass technology reserve and high-quality customers based on the fitting process, it is optimistic that the company will enjoy hundreds of billions of market opportunities brought by the innovation of intelligent devices such as "OLED+3D Glass", automobiles, VR equipment and so on in the next 2-3 years. We forecast that the revenue in the next three years will be 51.08,78.73 and 9.663 billion yuan respectively, an increase of 31.48%, 54.14% and 22.73% respectively over the same period last year, and the net profit belonging to the parent company will be 1.88,3.67% and 503 million yuan respectively, an increase of 190.06%, 94.73% and 37.07% respectively over the same period last year. The EPS is 0.30,0.44,0.64 respectively. The target price is 14.53 yuan, corresponding to 33 times PE in 17 years, covering for the first time. Give a "buy" rating.
Risk hint: market competition risk; performance commitment can not be realized risk; restructuring and integration risk