1Q19 performance is slightly lower than expected
New fiber technology announced 1Q19 results: operating income of 633 million yuan, an increase of 24.53% over the same period last year; net profit belonging to the parent company was 9.79 million yuan, down 80.9% from the same period last year, corresponding to a profit of 0.01 yuan per share, slightly lower than the lower limit of the performance forecast. The decline in performance was mainly due to the suspension of the low-end process protective film production line of Changzhou Phase I by 1Q19, while the lack of obvious volume of Changzhou Phase II and Phase III products led to a substantial increase in depreciation, amortization and expenses, and an increase of 14 million yuan in financial expenses compared with the same period last year.
Trend of development
The first phase of Changzhou business profit is expected to maintain a rapid growth rate. In 2018, dozens of materials of the company entered Apple Inc's industrial chain, with sales revenue of nearly 400 million yuan, a year-on-year increase of more than 100 percent, and laid a solid foundation for the introduction of the company's products to customers such as Huawei, OPPO, VIVO and LG.
Looking forward, the material number of the company's introduction of Apple Inc industrial chain is expected to continue to increase, while the company's domestic mobile phone import products increase and the proportion of high-end production lines continue to increase, Changzhou Phase I business profits are expected to maintain a rapid growth rate.
The production capacity of aluminum-plastic film continues to expand, but the lack of volume sales in Changzhou Phase II leads to profit pressure. The first set of production line 4Q18 in the second phase of Changzhou is put into production, and the second production line is expected to be put into production of 3Q19. The production capacity of aluminum and plastic film will continue to expand. However, as the company's Changzhou plant aluminum plastic film needs to re-carry out customer certification, it is still in the pioneering period of customer certification, the volume of aluminum plastic film products has not been significantly increased, and the depreciation amortization and expenses of the production line have increased significantly, which is a drag on Changzhou Phase II business profits. In the medium and long term, the improvement of domestic soft package battery permeability leads to demand growth and the company's products are expected to pass customer certification, and Changzhou Phase II aluminum-plastic film business is expected to grow rapidly.
Changzhou Phase III photoelectric display materials were put into production and customer certification was carried out smoothly. Two production lines of Changzhou Phase III have been put into production in November 2018, and the other three production lines are expected to be put into production by the end of 2019. The company's business in Changzhou Phase III mainly focuses on OLED flexible materials, and the domestic market space is huge, and it is expected to become the company's profit growth point in the future. at present, the company's certification work for important customers is smoothly opening, but due to downstream customer yield and other problems, it is expected that customer certification development will still take a long time.
Profit forecast
As the volume of Changzhou Phase II and Phase III products has not been significantly increased, and the low-end production line of Changzhou Phase I has stopped production, we have lowered our 20-year profit forecast for 2019 by 21% to 0.37 soybean 0.49 yuan per share.
Valuation and suggestion
At present, the company's stock price is 10% to 13 yuan lower than the target price of 2019 PE, corresponding to the 22% upside, and the company's recommended rating is maintained for 1920 35x27x PE.
Risk
Changzhou Phase II and Phase III product certification is lower than expected, Changzhou Phase I tape sales are lower than expected.