Deeply cultivate the lottery industry and create the layout of the whole lottery industry chain. The company's business covers lottery thermal ticket and instant ticket printing, lottery R & D and electronic lottery operation, ticket products and high-end packaging printing, RFID smart tags and Internet of things services, etc., and strive to open up the entire lottery industry chain. At the same time, the company makes great efforts to develop new business, based on the lottery industry chain, the company is looking for new opportunities for mergers and acquisitions, involved in communication base station antennas, culture and education and other industries with great potential projects.
Acquire Huawei 5G core suppliers and enter the upper reaches of the 5G industry chain. The company plans to buy 30% equity of Flemish Technology with 345 million yuan in cash, and the underlying company promises to deduct non-net profits of 9000 yuan, 12000 yuan and 150 million yuan in 2019, 2020 and 2021, respectively. Flanders' main products are base station antennas and radio frequency devices. At present, there are three domestic production bases, and customers mainly include Huawei, Jingxin Communications, BYD, Foxconn and other well-known manufacturers. Fleming Technology is the strategic core supplier of Huawei, and the listed company in the same industry as Dongshan Precision is located in the first echelon of domestic base station antenna production. The completion of the acquisition of Flanders by Hongbo shares will improve the strategic layout of 5G in the 5G era, build new profit growth points of the company, and enhance the overall profitability of the company.
Huawei leads the 5G market, and the industrial chain companies have benefited significantly. Huawei's 5G technical strength mainly includes the following four aspects: 1) Huawei has made remarkable achievements in 5G, from standard to global testing, from trial commercial to commercial; 2) from system base station, bearer to terminal chip. Huawei has the power to achieve 5G end-to-end commercial systems; 3) from the communications field to the vertical industry, Huawei has the most extensive cooperation, and 5G business incubation ability is strong. 4) Huawei has deep strength in 5G terminals. By 2020, China may become the world's largest 5G market. Huawei will provide chips for communication main equipment, optical modules and terminal equipment, which will significantly benefit related industry chain companies.
The radio frequency end of the base station antenna will enter the dividend period in 2019. 1) large-scale MIMO and radio frequency integration, technological change has opened a wave of base station construction. The Ministry of Industry and Information Technology predicts that the number of 4G base stations in 2018 will be 3.78 million, and we predict that the total number of 5G base stations will be 1.1-1.5 times that of 4G base stations. 2) with the application of MassiveMIMO technology, the quantity and price of antennas will rise in the 5G era. For the scale of the domestic base station antenna market, we expect it to reach 76.5 billion yuan in the future. 3) filter: accounting for 50% of the total RF cost, an important part of the RF front end, we estimate that the domestic market scale of the filter will reach 44 billion yuan.
Investment advice: dig deep into the main lottery business, buy Flanders into the 5G field, and follow Huawei to enjoy industry dividends. We estimate that the EPS of the company from 2019 to 2020 will be 0.09,0.34 yuan respectively, and the current stock price will be 93.9,24.7 times of PE respectively. Taking into account that the company completed the acquisition of Flanders, as a rare target of stagflation in the 5G sector, covered for the first time, given a "buy" rating.
Investment risk: the development of the main lottery business is not as expected, and the new business is not as expected.