Main points of investment
The company released its 2017 results KuaiBao on February 27, 2018. During the reporting period, the company realized operating income of 2.563 billion yuan, + 77.94% compared with the same period last year, and net profit of 218 million yuan, + 42.18% over the same period last year. In this regard, our comments are as follows:
Growth point one: modified plastics are growing rapidly, and the growth rate of LED plate is obvious. The company's main business is modified plastics, which is a first-class enterprise in the domestic modified plastics industry, and has been deeply cultivated in this field for many years. The volume of this traditional business increased rapidly in 2017. on the one hand, the company made use of the layout of capacity expansion to highlight economies of scale and drive profit growth; on the other hand, the company had rich experience in the field of modified plastics and continuously invested in research and development in the early stage. and through fine management, further strengthen cost control, leading to an increase in gross profit margin, ensuring the steady growth of the enterprise. Affected by the trend of the transfer of global LED manufacturing to the domestic market, the domestic LED industry continues to present a booming market opportunity of both supply and demand. Silver Optoelectronics, a subsidiary listed on the new third board, mainly focused on the LED plate, achieved rapid performance growth, and revenue increased by 103.26% in the first half of the year compared with the same period last year, promoting the continued improvement of the company's business.
Growth point 2: Xingke Electronics, a wholly-owned subsidiary, has improved its business technology and promoted the rapid growth of the company's revenue. Xingke Electronics, a wholly owned subsidiary of the company, is a highly competitive full-process solution provider in the field of CNC precision metal structures in China. Affected by Letv's problem, Xingke adjusted the strategy of binding major customers in time, eliminated the dependence of key customers and achieved stable profit growth, and the debt receivable with Letv was also solved through "debt-to-equity swap". The company continues to improve through the research and development of new composite materials, leading the market and supplying Huawei, oppo and other mainstream manufacturers. Xingke Electronics has been included in the consolidated statement in March 2017 which has significantly improved the company's profitability and its electronics industry business has become the company's second main business.
Long-term layout: the layout of lithium metal raw materials may become a new growth point of performance. The company's recent layout of new energy lithium electricity upstream scarce metal materials, rapidly promote the landing of the industrial chain. In September 2017, the company jointly funded the establishment of Jubilee Cobalt Industry with Jia Jun and Zhang Zhiyi, and signed a "Strategic Cooperation Agreement" with Congo Huaxin Company in October 2017 to seek cobalt ore supply. At present, as a national strategy, new energy vehicles are expanding rapidly, and with the increasing requirements for energy density, the demand for ternary materials is about to break out, which is greatly beneficial to the upstream cobalt ore. The new energy strategic layout is expected to improve the company's profitability for a long time, feed back the company's traditional automotive modified plastic customers, and cultivate new growth points of performance.
Risk tips: 1. The competition of modified plastics and metal CNC industry intensifies; 2. The investment and development of cobalt and other metal raw materials is uncertain; 3. The price of raw materials fluctuates.
Earnings forecasts, valuations and ratings. We are optimistic about the good development of the company's traditional business, Xingke's new order volume and its layout in the new energy industry chain, maintaining the company's 19-year EPS forecast of 0.76max 1.10 yuan, maintaining the target price of 22.70 yuan, and maintaining the "buy" rating.
