Issue convertible bonds to acquire established optical fiber and cable manufacturer Fuchunjiang Optoelectronics to cut into optical communications, raise funds to expand optical fiber production capacity, and layout independent optical fiber prefabricated rods, which is expected to share the high prosperity cycle of optical fiber and optical cable.
The company plans to issue convertible bonds to raise 900 million yuan, 450 million to acquire 100% equity in Fuchunjiang Optoelectronics, and 450 million to expand the production capacity of 5 million core kilometers of special optical fiber and 150T optical fiber preforms. At present, the company has completed the acquisition of Fuchunjiang Optoelectronics with its own funds in advance, and started to complete the industrial and commercial changes in July. The construction of the optical fiber and light rod expansion project has also been launched. The company has received approval for the issuance of convertible bonds, and the project funds invested in the previous period will be replaced after the follow-up funds are in place.
The investment in network construction of operators continues to increase, the demand for optical fiber and cable is strong, and the collection price is expected to maintain a steady upward trend. The company's optical fiber production capacity continues to expand, promoting the steady growth of short-term performance. After realizing the mass production of independent optical rods, it will further enhance the profitability of the company's optical communication business.
Operators have started the collection of optical fiber and cable in 2018, and it is estimated that the demand for optical fiber in 18 years will be about 350 million core kilometers, an increase of 20% over the same period last year. The domestic optical fiber preform has a supply gap of more than 10% in the past 18 years, and the price of optical fiber collection is expected to rise steadily. The company already has about 9-10 million core km optical fiber production capacity, and is expected to further expand to 15 million core km optical fiber production capacity in 2019, and the 150T light rod project is also expected to achieve mass production. Under the strong industry demand, the smooth release of the company's production capacity will promote the stable growth of short-term performance, and after achieving mass production, it will further reduce costs and enhance profitability.
The traditional power cable industry is facing the pressure of raw material cost in the short term. The company is one of the earliest cable enterprises in China and is currently the first echelon supplier in China, covering all the cable products required by the State Grid. After commodity prices gradually stabilize, the company's power cable business is expected to maintain steady growth.
Founded in 1958, the company is one of the earliest power cable enterprises in China, a key backbone enterprise of the Ministry of Machinery and Electrical Engineering and the chairman of the wire and cable industry in Zhejiang Province. The product line covers all the power cable products needed by the State Grid. Commodity prices rose by a large margin in 2017, causing greater cost pressure on the main industry of power cables. The company alleviates the cost pressure through hedging and other means, and after commodity prices gradually stabilize, the company's power cable business is expected to maintain steady growth.
The company has established a PLC chip production line in a joint venture with Korean enterprises. Using PLC technology platform, the cost of passive optical devices is low. In the future, the company will actively expand the field of optical devices / modules and continue to extend around the optical communication business.
The company has built a production line with an annual production capacity of 6000 6x8 wafers, producing PLC chips which are widely used in passive devices, and self-packaged into PLC splitters and other passive optical device products. Mastering home-made chips makes the company's products more cost-effective. In the future, the company will continue to actively expand the optical device / module business and extend the industry chain horizontally around the optical communication business.
Investment suggestion
The company's traditional power cable main business is expected to maintain steady growth, the acquisition of the Group's high-quality optical communications assets, the issuance of convertible bonds to finance the expansion of optical fiber and optical cable production capacity, as well as the core optical fiber preform production capacity, it is expected to share the high business cycle of the optical communications industry, capacity release to promote stable short-term performance growth, and the company's profitability will be further enhanced after the optical fiber preform is mass produced. It is estimated that the company's net profit from 2017 to 2019 will be 1.01,3.02 and 454 million yuan respectively, which will be rated as "overweight".
Risk hint: the risk of technology research and development, the price increase of power cable raw materials is higher than expected.
