I. Overview of events
Recently, Huaying Science and Technology issued an announcement: the sixth generation TFT-LCD production line project of Huajiacai has been built smoothly, the project has been officially mass produced on June 30, 2017, the product has been certified by customers, and the product will be officially shipped after delivery.
II. Analysis and judgment
The TFT-LCD project is progressing smoothly, with consumption upgrading driving demand for high-end screen panels. 1. The sixth generation TFT-LCD production line of subsidiary Hua Jiacai is mainly used for the production of high-end smartphones, tablets and car displays with a design capacity of 30,000 pieces per month. The project has been successfully lit up in trial production in March this year, has started mass production, the future product is about to ship, and the full screen product is expected to be launched by the end of 2017. The company estimates that after the project reaches production, the turnover will be about 10.5 billion yuan per year.
2. The global demand for high-end panels is gradually increasing. According to IHS, car touch panel shipments will reach 5000 million in 2017, an increase of 11% over the same period last year, and is expected to exceed 60 million by 2019, with a compound annual growth rate of about 10%. In the mobile phone panel, as of the fourth quarter of 2016, 37% of the phones had a resolution of no less than 1080p, an increase of 9% over the same period last year, and consumer demand for higher resolution screens remains strong.
3. We believe that with the attention of users to the display effect and the development of automotive electronics, the positioning of the sixth generation TFT-LCD production line of Huajiacai will be in line with the market development direction, and the number of display screens will continue to contribute to the company's performance after delivery.
The view is reiterated: the government strongly supports the LCD panel project, and the company's anti-risk ability and competitiveness are enhanced.
1. According to the announcement, this contract involves a subsidy of 2.64 billion yuan for the project, which is provided to Huajia Lottery Company within six years after the project is put into production, with an average of 440 million yuan per year. According to the contract, the company issued 10 billion yuan of additional shares, of which the registered capital of Huajiacai Company was 8.4 billion yuan, and Putian Municipal people's Government and Fujian Electronic Information (Group) Co., Ltd. jointly subscribed for 5 billion yuan, accounting for 59.5% of the registered capital of Huajiacai Co., Ltd. The difference between the total investment of the project and the registered capital of Huajiacai (about 3.6 billion yuan) will be completed through syndicated loans. In addition, the government will also give support to the company from the aspects of land supporting conditions, energy supply, government subsidy, talent introduction and so on.
2. We believe that getting the full support of the government will help the construction and development of the project, enhance the anti-risk ability of the subsidiary Hua Jiacai, and improve the market competitiveness. In addition, project subsidies will also contribute to performance.
Third, profit forecast and investment suggestions
It is estimated that the company's EPS from 2017 to 2019 will be 0.15,0.24,0.33 yuan respectively, which will give the company 40x PE in 2017, and a reasonable valuation of 6.00 to 6.75 yuan in the next six months, maintaining the company's "cautious recommendation" rating.
Fourth, risk tips:
1, the production capacity progress is not as expected; 2, the construction progress of the project is not as expected; 3, it shows that the market competition is intensified.
