Incident: On March 27, the company released its annual report. In 2018, it achieved operating income of 1,949 billion yuan, a year-on-year increase of 10.75%, net profit of 125 million yuan, a year-on-year increase of 91.20%, net profit of 111 million yuan, a year-on-year increase of 103.96% over the previous year. At the same time, the company plans to publicly issue convertible corporate bonds to raise no more than 794 million yuan in capital, mainly for the industrialization of high-precision multi-layer flexible printed circuit boards and the development of unfinished projects. Key investment points: Integrate Juntian Hengxin and provide advanced modules. The company achieved control of Juntian Hengxun through mergers, acquisitions and restructuring. In 2018, Juntian Hengxun achieved operating income of 190 million yuan and net profit of 99 million yuan, exceeding the promised performance of 1.09 times this year. Juntian Hengxun is a company dedicated to solving the contradiction between upstream large-scale component manufacturers, which usually only choose to develop standardized generic products and different feedback on device requirements brought about by changes in downstream application scenarios and customer needs, to solve the failure problems of equipment products caused by general electronic components for customers. In particular, in the field of electronic control and power management, it has accumulated very deep experience. It is part of the company's downstream PCBA chain. The significance of this acquisition of Juntian Hengxun is not limited to increased reporting performance, but is also part of the company's vertical integration of the industry chain. Bomin's own development direction is also more towards high power and vehicle integration. In this field, Juntian Hengxun just happens to reinforce the company's poor foundation in device linkage and dynamic operation analysis. If the two achieve better linkage in the future, it will become an important foundation for the company's advanced control module suppliers. Jiangsu Bomin's losses have gradually shrunk, and growth is yet to come. Jiangsu Bomin is the implementing entity of the company's post-IPO fund-raising project. Since the company went public two years since the company went public, the profit growth rate has been lower than the growth in operating income. The main reason for this is that Jiangsu Bomin's performance release fell short of expectations. Jiangsu Bomin's high-end HDI board products has a long development cycle, high requirements for equipment and technology, delays in funding, etc., so the progress of new equipment run-in and trial production fell short of expectations, causing product production capacity to be unsaturated. Depreciation and amortization of fixed assets such as operating equipment led to higher costs and expenses, compounded by factors such as environmental protection production restrictions and price increases for upstream copper clad plate and copper foil, etc., which led to this situation. As can be seen from the 2018 annual report, the company has “broken through many key technical difficulties such as any layer interconnection, minimum line width/line spacing, electroplating blind holes, and interlayer alignment deviation control in the production of high-end HDI circuit boards,” and achieved good results in “embedded high-current circuit boards, multi-layer flexible printed circuit boards, rigid integrated HDI circuit boards, and high-frequency high-speed printed circuit boards.” It is easy to see that in the field of high-end products such as HDI, Bomin is now gradually on the right track. This means that the profitability of Jiangsu Bomin is getting closer to the positive direction as scheduled. Judging from actual loss figures, the Jiangsu subsidiary lost 13.95 million yuan. Compared with 2017, its loss gap has been drastically reduced, and upstream disruptive factors such as environmental protection and raw material price increases have gradually decreased. Whether the performance in 2019-2020 will reverse is worth looking forward to. Taking the lead in deploying high-power and electronic control applications in vehicles, it is expected to enjoy the dividends of increasing the electronic penetration rate of new energy vehicles and vehicles. In recent years, the company has focused on power management and motor control modules for power electronic control systems. It aims to help three-power systems achieve highly integrated, structured and modular comprehensive solutions through “high current board” technology. Bomin Electronics' continuous deepening investment in the field of automotive electronics is very solid. The automotive electronics industry's high certification barriers and the phased penetration characteristics of the industry have given the company great interest in this field. Bomin's expansion in automotive PCBs and downstream high-power and electronic control fields is quite leading in the domestic PCB industry. This is also an important factor that distinguishes the company from other competitors. At this point, there is no uniform specification for automotive PCB boards. Different battery, motor, and electronic control manufacturers are still choosing between price and quality. Low prices are often accompanied by poor product quality. It is foreseeable that as the NEV market gradually matures, the trend of “high quality” becoming the main demand of automobile manufacturers is quite clear. The parameters and specifications of automotive PCB boards will gradually be unified, material requirements will also increase, and the average price is expected to rise. We believe that the further increase in the penetration rate of new energy vehicles and the dual promotion of industry standardization will be the biggest driving force for a new round of healthy growth in the automotive PCB industry. Bomin's pioneering layout in the field of automotive PCB boards is expected to enjoy the future dividends of new energy vehicles and the increasing penetration rate of automotive electronics. Profit forecast and investment rating: Maintaining a buying rating. Bomin Electronics achieved vertical integration of the industrial chain through the acquisition of Juntian Hengxun in 2018. Although Juntian Hengxun's supporting development projects have changed due to insufficient capital raised, the company is likely to continue to advance through self-financing and issuance of convertible bonds. The Jiangsu fund-raising project has achieved breakthroughs in key factors, and losses are gradually shrinking. The dominant automotive high-power board and electronic control applications are still making full progress. Overall, the company's steady development strategy has achieved expected results. The company's net profit for 2019-2020 is expected to be 2.15, 2.71 and 325 million yuan respectively. The current stock price corresponding to PE is 20.27, 16.06 and 13.41 times, respectively, maintaining the buying rating. Risk warning: (1) Juntian Hengxun did not complete the number of performance promises, leading to loss of goodwill; (2) the downstream vehicle electronics rate fell short of expectations; (3) the extent of implementation of domestic NEV PCB board standards fell short of expectations; (4) the company's convertible bond raising and project implementation were uncertain.