This report is read as follows:
The company is a leading enterprise in the radio frequency industry, Huawei base station RF products gold core supplier, 5G commercial in 2019, the company divested inefficient assets, focus on 5G radio frequency filter, the performance is expected to maintain rapid growth in the next few years.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. We estimate that the operating income of the company from 2019 to 2021 is 3.16 billion yuan, 5.631 billion yuan and 10.13 billion yuan respectively, and the net profit is 246 million yuan, 550 million yuan and 941 million yuan respectively, and the corresponding EPS is 0.32 yuan, 0.72 yuan and 1.23 yuan respectively. Considering that the RF business is facing a 5G construction boom, the company is the core supplier of Huawei RF products. With reference to the PE and APV valuation methods, and combined with the comparable company valuation level, the company is valued at 51 times PE in 2019, with a target price of 16.32 yuan, with a "overweight" rating for the first time.
5G commercial acceleration, RF products industry ushered in a high business cycle, the company's 5G products are expected to rise in volume and price. 5G commercial process speed up, on the whole, due to the higher frequency of 5G, the number of base stations required is about 1.5 times that of 4G, superimposed 5G using Massive MIMO technology, will promote a large-scale increase in demand for 5G radio frequency products. As the gold core supplier of Huawei base station radio frequency products, 5G radio frequency filters are expected to rise in volume and price, and business performance is expected to exceed expectations.
The company's downstream customers continue to expand, performance is expected to improve marginally. The company is actively expanding downstream customers, focusing on expanding Ericsson and Nokia and making breakthroughs. With fierce global competition in the 5G era, Ericsson and Nokia need to look for "high-quality and cheap" industrial chain companies around the world. Dafu Technology uses the existing technological advantages and is expected to enter the core supplier list of Ericsson and Nokia, and its business performance is expected to improve marginally.
Catalyst: 5G commercial acceleration, 5G trial commercial breakthrough, 5G related license issuance.
Risk hint: operator 5G investment is lower than expected; trade war brings industry uncertainty.
