I. Analysis and judgment
5G commercial acceleration, cable and PCB services are expected to scale up
The company's traditional business is the R & D and production of high-end RF cables, and the communications sector accounts for about 80% of the revenue. Products include, but are not limited to, high-speed transmission inside and outside the cabinet (high-speed connectors, etc.), optical transmission (optical modules, optical cables), RF transmission (RF cables, connectors, components, PCB boards), power transmission, core components of 5G antenna (PCB boards, chips), data center integrated cabling and other products. At present, the three major operators have accelerated the layout of 5G and successively announced 5G schedules, all of which plan to achieve pre-commercial use in 2019 and large-scale commercial use in 2020. Experts predict that China's investment in 5G construction will reach 705 billion yuan, an increase of 56.7% over 4G. At the present stage, the company focuses on the R & D and manufacture of 5G products, including PCB/PCBA for 5G antenna, optoelectronic composite cable and board-to-board connector. Benefiting from the accelerated commercialization of 5G, the revenue growth of the corporate communications sector is expected to maintain more than 30% in the future.
The installation of new aircraft is accelerated, and military business is expected to grow rapidly.
The company's military business is mainly an integrated harness scheme for airborne / offshore platforms that meets the requirements of EMC, accounting for about 20% of revenue, and its products include integrated wiring harness, aviation wires, connectors and components. In addition, the company has carried out the research and development of the system-level scheme "underwater integrated system" and its subsystem "underwater and air integrated information system" in the field of special science and industry. products include passive directional sonobuoy, underwater autonomous mobile detection sonar, underwater fixed sonar. In the next two years, benefiting from the increasing defense spending and eliminating the impact of military reform to eliminate the industry law of "loose before and tight after" during the 13th five-year Plan, the company's military business is expected to see rapid growth, and future income growth is expected to maintain more than 20%.
Buyback + increase of holdings, demonstrating the company's confidence in long-term development
In August 2018, the company announced that it plans to repurchase shares with self-raised funds, with an amount of not less than 8.32 million yuan and no more than 14.32 million yuan, and the price not exceeding 14.32 yuan per share. The repurchased shares will be used as the stock source for the later implementation of the company's share incentive plan, employee stock ownership plan or equity incentive plan. In May 2018, the company announced that Mr. Huang Changhua, the actual controller, plans to increase the company's shares worth RMB 20 million-100 million in the next 12 months with self-raised funds. We believe that buyback + increased holdings fully reflects the company's long-term development confidence.
II. Investment suggestions
The company layout 5G + military industry, the future downstream industry prosperity is relatively high, we are optimistic about the company's long-term development. From 2018 to 2020, the company's EPS is expected to be 0.26,0.41 and 0.54 yuan respectively, corresponding to PE of 37x, 23x and 17x, covering for the first time and giving a "recommended" rating.
Third, risk tips:
The 5G propulsion fell short of expectations, and the military aircraft were not installed as expected.