Acquisition of Flemish, 5G antenna RF faucet. The company's traditional main business is the printing business. In 2018, it issued a preliminary plan for the acquisition of Flemish, a manufacturer of antenna radio frequency. The acquisition valuation is 1.15 billion yuan. On September 6, the company plans to acquire a 30% stake in Flanders Technology with 345 million yuan in cash. In 19-21, Flemish performance promised to deduct a non-net profit of 0.92 billion yuan. The initial disclosure of the pre-plan determined that the proportion of the transaction is 75%, and there may be further acquisition plans.
Flanders Chenghua opened the 5G preface in the name of the core supplier. Flanders is currently the main supplier of Huawei antennas, the main products are base station antennas, radio frequency devices and so on. The innovation of 5G at the antenna end, coupled with the increase in the number of 5G base stations and the application of Massive MIMO and other technologies, have greatly spawned the demand for the antenna RF side. Flanders is expected to enjoy the global 5G dividend with the help of quality platforms such as Huawei. The market defines Flanders as Huawei contractors and feels it lacks growth, but we believe that as the main equipment provider has a stronger voice in 5G and will occupy a larger antenna share, the enterprises in its supply chain will benefit more.
With the help of the capital market, it is expected to open up the antenna industry chain. With the antenna as the core, Flanders is expected to expand upstream and horizontally to open up the industrial chain. Flanders and Huawei have worked together for more than 10 years, and their share has increased steadily in recent years, with a solid industrial foundation and a layout worth looking forward to.
5G holds the lifeline of China's science and technology, and Huawei is still the center of the industrial chain. The 5G spectrum is expected to land in the near future. Under the background of frequent catalysis of recent policies, 5G, as the foundation of the emerging science and technology industry, plays an important role in promoting the warming of the industrial chain, promoting employment and cultivating core technologies. 5G is still a deterministic investment opportunity. Huawei still has a big advantage with a share of more than 30% of the global main equipment market, and relevant supply chain companies will also enter a dividend period.
Profit forecast: we estimate that the company's net profit from 2018 to 2020 will be 15 million yuan / 84 million yuan / 201 million yuan respectively. Corresponding to the valuation of 209-37-15 times, covering for the first time, taking into account the company's high-quality growth and certainty, given a "buy" rating.
Risk tips: 5G construction schedule is not as expected, the risk of affecting the company's related business; equipment companies' technical route changes, affecting the company's related business risk; the deterioration of the Sino-US trade war, affecting the company's related business risk; there are uncertain risks in the transaction.