Key points:
Chuhan Technology's new production base was put into operation, and the hidden problems of major customers were gradually solved. The new production base of Chuhan Technology, a holding subsidiary of the company, was officially put into operation in the first half of the year, solving the production site problem and creating conditions for the introduction of the company's new products, new businesses, and new customers. At the same time, through independent development and transformation of automated equipment, production efficiency has been greatly improved. In 2018, due to trade frictions between China and the US, Chuhan Technology's revenue and net profit were all affected to a certain extent. The company took active steps to introduce new downstream customers, and the customer structure will become more reasonable in the future. At the same time, the company has increased R&D investment and industrialization of chip packaging and optoelectronic modules in recent years. The revenue structure is continuously improving, and it is expected that the future will benefit from the favorable construction of facilities in the 5G field.
Distribution grid investment accelerated. The performance of the switch pipe business in the first half of the year was impressive, and the focus of domestic power system investment was skewed towards distribution grids. The company seized market opportunities and seized market share in the power distribution sector, and production and sales of switch pipe products increased dramatically in the first half of 2018. The company has a whole industry chain from ceramic manufacturing to complete electrical equipment in the field of switch pipes, and has strong product delivery capabilities. In 2017, the company successfully developed an ultra-fast DC circuit breaker isolator, filling a gap in the country. At the same time, the company ranks as an industry benchmark in terms of environmental protection, effectively avoiding the impact of environmental monitoring
Emission tubes are exported to overseas laser equipment customers. Accelerator irradiation broadens application prospects. After decades of technological accumulation, the company's electron tube products are basically comparable to similar products from foreign companies in terms of technical indicators, and have strong competitiveness in the international market. Currently, more than 60% of emission tube products are exported to Europe as core components of laser processing equipment. At the same time, according to the company's plan, the Emission Tube Division will focus on developing new markets in the future to enter the field of accelerator irradiation.
Profit forecasts and suggestions:
We expect the company's net profit to the mother in 2018-2020 to be 42 million/56 million/073 million yuan respectively, and the corresponding EPS will be 0.08 yuan/0.10 yuan/0.13 yuan respectively. Referring to the average valuation level of comparable listed companies, considering that the optoelectronic device business that the company focuses on will benefit from the broad development space of 5G in the future, plus the valuation premium brought about by entering the mainstream communication equipment supply chain abroad, the company is currently given 45 times PE in '19, and the corresponding target price is 4.65 yuan. First coverage, giving a buying rating.
Risk warning: Product market competition intensifies and prices are under pressure; the company's customer expansion falls short of expectations; the impact of the trade war on the supply of raw materials; the impact of exchange rate fluctuations on the company's procurement costs.
