2017 performance in line with expectations
Jiantao laminate reported 2017 results: revenue rose 17 per cent year-on-year to HK $18.24 billion; net profit rose HK $3.76 billion; basic net profit rose 92 per cent year-on-year to HK $3.74 billion (HK $1.216 per share).
The company's profit is only 3% higher than CICC's forecast, which is basically in line with expectations. The company announced a final dividend of HK $0.526 per share, with a full-year dividend of HK $0.852 per share and a dividend yield of 70 per cent.
Trend of development
In the first quarter of 2018, both volume and price rose in the off-season. In the second half of 2017, the company's copper clad laminate price rose 22% to HK $126 and continued to rise 5% in January 2018. The new production capacity of glass yarn and glass cloth will be completed by the end of 2017, which will help solve the bottleneck of capacity expansion of copper clad laminate.
The amount of copper clad laminate is gradually increasing. Therefore, the income in January and February this year is better than that in the same period last year.
Integrated ASP of CCL is expected to stabilize and capacity expansion is expected to continue in 2018. Looking ahead, we expect CCL prices to stabilize in 2018, mainly due to increased demand, particularly in the telecommunications and automotive industries, as well as an increase in high value-added products. The company plans to increase the production capacity of high value-added products (such as sheet, high-frequency plate and halogen-free board) to optimize the product portfolio.
Profit forecast
We have raised our earnings per share forecasts for 2018 and 2019 by 2 per cent and 6 per cent from HK $1.23 and HK $1.2 to HK $1.25 and HK $1.28 respectively, mainly due to lower-than-expected operating cost rates.
Valuation and suggestion
At present, the company's share price corresponds to 1.9 times 2018 market-to-book ratio and 1.7 times 2019 market-to-book ratio.
We maintain our recommended rating and target price of HK $15.30, which is 29.22% upside from the current share price.
Risk
The price of copper clad laminate fell; the price of raw materials fluctuated.