Main points of investment:
After 11 years of deep ploughing in the industry, the new team opened the company and the new growth company has focused on the LED chip industry since its inception in 2006. it is the leader in the field of red and yellow LED chips with profound historical accumulation in China. After Hejun Capital entered the company in 2016, under the premise of taking LED chip as the main business, the company's organizational structure was deeply analyzed and adjusted, and a clear and forward-looking development strategic plan was formulated for the company. Reviewing the growth path of many technology giants, the relay and inheritance of major shareholders has always been the original founder is not a necessary and sufficient condition for the development of the company, good management and incentive system is the best way to help the growth of enterprises. We believe that we should face up to the integration of industrial capital such as Hejun and the company, which is one of the important manifestations of the progress and development of China's capital market.
Downstream application industry warms up, emerging markets are booming LED industry chain downstream application industry mainly has lighting, display, backlight and signal indication and other major areas. In 2016, the market size of China's LED downstream applications reached 428.6 billion yuan, an increase of 23% over the same period last year. General lighting is the largest downstream application market, with an average annual compound growth rate of 32.08% in the past three years. With the vigorous development of emerging markets such as small spacing, night hiking market and plant lighting, the application scenarios of LED are constantly expanding, and the demand for LED chips is growing rapidly. It is expected that the tight supply and demand situation in the LED chip industry will continue in the next three years.
Continue to expand production to establish the company's industry position, scale effect gradually shows that after several years of reshuffle in the LED chip industry, the production capacity of some Taiwan enterprises and backward small factories continue to withdraw, and domestic dominant manufacturers of LED chips represented by San'an, Huacan and Qianzhao have gradually entered a new round of production expansion cycle. Since last year, Qianzhao Optoelectronics has made great efforts to expand the production of red-yellow and blue-green LED chips, insisting on making the company's main chip industry bigger and stronger. We predict that after this round of expansion in 2017-2018, the company is expected to form 350000 red and yellow LED chips to last month's production capacity, blue and green LED chip production capacity will exceed 1 million pieces / month, compared with the current growth rate of about 100%, the company's past capacity bottleneck will be broken, scale effect will gradually appear.
Profit forecast and investment rating: maintain the buy rating as the leader of the domestic red and yellow light LED chip. After successfully cutting into the blue and green field, with excellent upstream and downstream channels, good enterprise management methods, and with the help of the warming east wind of the industry, the company quickly opened up the market and achieved continuous improvement in the profitability of the main industry. we expect the company to achieve a net profit of 2.07,2.73 and 388 million yuan in 2017-2019. Corresponding to 30.9,23.4,16.5 times of PE from 2017 to 2019. We believe that Ganzhao is expected to become another rising star of the domestic LED supply side after San'an and Huacan. The company's practical work and layout will be expected to become an effective guarantee for future performance, be optimistic about the company's sustained and steady growth in the next three years, and maintain the company's buy rating.
Risk tips: 1) the risk of LED chip price decline; 2) the company's product sales are not as expected; 3) the progress of the expansion project is not as expected.