I. Overview of the incident
Recently, Huaying Technology released its September revenue briefing: September consolidated revenue of 516 million yuan, including 505.6037 million yuan for module-related business, 271,800 yuan for cover glass business, and 9.999 million yuan for panel business.
II. Analysis and Judgment
Module-related business continues to grow, and panel production capacity is increasing rapidly
1. The company's revenue in September increased 24.48% year on year. Among them, module-related business revenue was the highest in a single month since September 2015, accounting for 98.01% of total revenue, up 23.87% year on year, and 20.44% month on month; glass cover business accounted for 0.05% of total revenue, down 95.66% year on year, down 12.67% month on month; new panel business accounted for 1.94% of total revenue, up 924.32% month on month. The company's revenue from January to September increased 11.20% year on year. Among them, the module-related business increased 12.26% year on year, and the glass cover business fell 90.53% year on year.
2. We believe that the structure of the LCD module business with the company's traditional advantages has been smoothly adjusted. As the panel production capacity of domestic manufacturers continues to be released, the company is also expected to continue to benefit; the company's sixth-generation TFT-LCD production line has been officially mass-produced, and production capacity is rising rapidly. It will continue to contribute revenue to the company in the fourth quarter; the cover glass business is in the yield improvement stage and is expected to open up new growth points for the company.
The panel project has been mass-produced, and the yield of the cover glass production line has been adjusted
1. The subsidiary Huajiacai's sixth-generation TFT-LCD production line project was officially mass-produced on June 30 this year, and revenue was achieved in July. Currently, production capacity is rising rapidly, the products have been certified by customers, and the products will be shipped in batches after official mass production. The product line is mainly used to produce high-end smartphones, tablets, and automotive displays, with a design production capacity of 30,000 units/month. The company expects a turnover of about 10.5 billion yuan per year after the project is completed. Global demand for high-end panels is gradually rising. According to estimates, global full-screen smartphone shipments in 2017 were around 130 million to 150 million, accounting for about 10%. In 2018, as full-screen technology from major panel manufacturers continues to mature, full-screen smart phones will enter the release stage.
2. The subsidiary Corishi Phase II cover glass business is currently in a yield climbing phase, and is implementing technical improvements in formulation and process details.
3. We believe that the sixth-generation TFT-LCD production line is positioned and has advanced technology. As production capacity continues to climb and yield increases, it will open up new growth points for the company in the future; the cover glass business layout 3D glass production line is expected to return to profit after the formulation and process technology improvements are completed.
III. Profit Forecast and Investment Suggestions
It is estimated that the company's EPS from 2017 to 2019 will be 0.09 yuan, 0.12 yuan, and 0.19 yuan respectively. Based on the flexibility of the company's performance growth, the company can be given 70 to 75 times PE in 2017. The reasonable valuation for the next 6 months is 6.3 to 6.75 yuan, maintaining the company's “careful recommendation” rating.
4. Risk Reminder:
1. Production capacity progress falls short of expectations; 2. Project construction progress falls short of expectations; 3. Shows increased market competition.
