The concentration of terminal brands is enhanced, the competition between middle and low-end models is fierce, the requirements of cost control and supply chain management are improved, and one-stop suppliers usher in growth opportunities. The increase of shipments of terminal brand models and single models has higher requirements for cost control and supply chain management, and the cooperation with one-stop suppliers is getting closer and closer, which is expected to be deeply bound. In addition, the mid-and low-end models of the terminal brand turn to ODM manufacturers, and suppliers who directly supply ODM manufacturers are expected to benefit.
The proportion of major customers' income has further increased, and the module business has achieved steady and rapid growth. The company is the leader in the touch module industry, and the increase in the proportion of major customers brings large-scale orders with optimized product structure and stability. It is expected that the touch display business is expected to maintain a growth rate of about 10% in the next three years. The camera module industry benefits from the increase in volume and price brought about by the improvement of pixel and dual-photo and multi-photo penetration, and is the most prosperous consumer electronics segment. The company's capacity expansion is rapid, with the advantage of major customers to achieve capacity release, 18-20 revenue growth is expected to reach 80%, 40% and 30%, respectively. The company's 3D glass cover, fingerprint recognition module and electronic paper module are developing well, and there are many bright spots.
The prospect of FPC industry is promising, and the company leads the industry in business technology and production capacity, and is expected to achieve rapid growth in the next three years. The FPC industry as a whole has maintained a rapid growth rate, the global production capacity has accelerated the transfer to Chinese mainland, and the company is in an industry leading position in terms of FPC technology and production capacity. The pace of FPC progress is likely to slow as a result of equity transfers, with FPC business expected to grow by about 35 per cent in 18-20 years.
The material business is the future transformation direction of the company, the card position is accurate, is expected to achieve the outbreak. Wireless charging and EMI materials have broad prospects, the company ahead of time in wireless charging materials and EMI shielding and absorbing materials precision card position, waiting for the industry to take off. It is estimated that the revenue of the company's materials business in 18-20 years will be 200 million yuan, 480 million yuan and 960 million yuan, and the gross profit margin will be maintained at about 60%.
Investment advice: taking into account the lower-than-expected growth of smartphone shipments and the lower-than-expected progress of the company's FPC, we lowered our profit forecast for 2018-2020 to 1.409 billion yuan, 1.667 billion yuan and 1.938 billion yuan, corresponding to EPS of 0.45,0.54 and 0.62 yuan, respectively, corresponding to the stock price of 11.2 times, 9.4 times and 8.1 times PE on December 25, 2018. The company has broad room for growth and low valuation. With the completion of the equity transfer, the liquidity risk of the company can be resolved, and the valuation is expected to pick up and maintain the "recommended" rating.