Events:
Jiyin Technology, a wholly-owned subsidiary of the company, acquired 100% equity in Shenzhen Huadong Xing Science and Technology Co., Ltd. in cash at a transaction price of 66 million yuan. Huadong Xing's main business is to develop, produce and sell automatic surface mount equipment for the core components of the smart phone industry chain. the main products are automatic turntable auxiliary material attachment equipment, hot plate machine equipment, two-dimensional code attachment equipment, multi-function loading and unloading machine and so on.
Multi-faceted complementary advantages to promote the coordination of industry and technology: the acquirer Jiyin Technology ploughs the field of liquid crystal display hot pressing and laminating automation, and its main products are widely used in liquid crystal modules, backlights, cameras, film sticking, precision welding and other fields. East China Xing mainly provides automated surface mount equipment used in the production of core components such as BRM, CCM, FPC, LCD, TP modules and mobile phone covers in the smartphone industry chain. The two companies specialize in the field of automation equipment in different 3C consumer electronics fields, and their products are highly complementary, which helps to extend the industrial chain and provide more abundant product types for the same customer. At the same time, Huadong Xing also has a certain accumulation in precision automatic film lamination, fast lamination and rapid imaging processing, which is complementary to the core technologies in the field of hot pressing and laminating automation such as automatic alignment of high-precision multi-lens CCD images mastered by Jiyin Technology, so as to strengthen the company's competitiveness in the field of product technology.
Strong combination of customer resources to enhance the influence of the company's brand: Huadong Xing was founded in 2015, with revenue of 3.566 million yuan in 2016, and by November 2017, the company's revenue had reached 16.6984 million yuan, 4.68 times that of the previous year, and achieved a net profit of 1.2104 million yuan. At the same time, Huadong Xing promised that the deduction of non-net profit in 2018-20 would not be less than 550,715,9.35 million yuan. Jiyin Technology mainly serves middle and high-end customers, including JDI, OMRON, Sharp, Xinli, Tianma and other domestic and foreign well-known manufacturers; East China Xing downstream customers include Yecheng Optoelectronics, Oufei Technology, Helitai, Group Chuang and other intelligent module manufacturers in the domestic Apple Inc supply chain system.
This acquisition can effectively promote the integration of the company's downstream customers and enhance the company's brand influence and market share.
In line with the company's extension layout strategy: the company has always been committed to creating a platform company with "intelligent equipment + materials + overall solution" in the field of electronic information. Among them, the company acquired Toulian Electronics and laid out lithium materials in November 2015, completed the acquisition of Jiyin Technology in March 2016, and completed the acquisition of Xuan Shuo Zhizhao and Pengyuwei in March 2017 to enter the fields of LED, semiconductors, bulk patches, and welding automation. This acquisition of Huadong Xing continues the company's style of rapidly expanding the industrial chain through extension, and improves the industrial layout of the company in the field of industrial 4.0 intelligent manufacturing. Relying on the company's rich experience in acquisition integration, synergy can be expected.
Benefiting from import substitution and technology upgrading, there is a broad downstream market: with the cost-effective products and local service advantages, the trend of local enterprises to replace South Korean and Taiwan-funded enterprises in the flat panel display testing industry is becoming more and more obvious. As the investment in the high-generation production line of the flat panel display industry continues to increase and the global flat panel display production capacity continues to transfer to China, it will obviously lead to the growth of investment and demand for testing equipment in the flat panel display industry. At the same time, the penetration of LTPS-LCD and LTPS-AMOLED in the global smartphone market continues to increase, reaching 41% and 30% respectively in 2018, occupying a major market share. As a supplier of automated surface mount equipment for LCD, TP and other modules, Huadong Xing will benefit from the downstream incremental market space and provide a new profit growth point for the company's development.
Investment suggestion: we forecast that the company's revenue for 2017-2019 will be 1.323 billion yuan, 1.755 billion yuan and 2.282 billion yuan respectively; the net profit attributable to the parent company will be 227 million yuan, 317 million yuan and 422 million yuan respectively; and the earnings per share will be 1.15,1.61,2.14 yuan respectively. The six-month target price is 52 yuan, maintaining the "buy-A" rating.
Risk tips: downstream PCB industry demand growth slows down, OLED penetration increases faster than expected, subsidiary performance falls short of expectations, parent and subsidiary coordination and integration risks, and so on.