Event: the company issued a performance forecast for the first half of 2019, which is expected to achieve a net profit of 3800-43 million yuan, turning a loss into a profit compared with the same period last year.
The industry is gradually coming out of the trough, and the performance growth is in line with expectations. With the inflection point of operators' capital expenditure, the investment on the wireless side has increased, and the prosperity of the RF industry has rebounded. According to our review, in the same year when 3G licenses were issued, the revenue of the antenna RF plate increased by 47% and the net profit increased by 75%. In the second year after 4G licensing, revenue grew by 41% and net profit increased by 1630%. This is related to the construction pace of "network construction, wireless first". After the licensing of 5G, the RF plate is expected to usher in a stage of rapid growth again.
Focus on the main business, 5G brings new opportunities in the RF industry. 5G Massive MIMO and active antenna technology will bring a simultaneous increase in the quantity and price of RF devices, and the amount of filters used in a single base station will reach 192. if calculated at the price of 50 yuan per channel, the market scale will be as high as 100 billion yuan, corresponding to the annual purchase scale of 20 billion yuan, which is much higher than the market scale of less than 10 billion yuan per year in 4G period. The company sets up a "focus on main" strategy, strips off loss-making assets such as Dafu heavy Industry, terminates mergers and acquisitions such as Bailifeng, and focuses on the experience, technology and customer advantages that the company has accumulated over the years, and gains more room for growth.
Benefit from the rise of the industrial chain, the customer structure continues to be optimized. Huawei occupies a high share of the wireless market, has complete technical strength on the wireless side, and is least affected by trade wars. The company is the main supplier of radio frequency devices for Huawei, which accounts for more than 40% of the company's sales in recent years. At the same time, the company is actively expanding downstream customers. In addition to Huawei, it has become a filter supplier for Ericsson, Nokia and Komp, as well as a RF structure supplier for Ericsson and Komp. Optimizing customer structure will benefit 5G construction in an all-round way.
The technical reserve of the dielectric filter has been completed, waiting for 5G large-scale collection to be opened. The company's 5G products such as "metal cavity + metal resonant rod", "metal cavity + dielectric resonant rod" and "dielectric waveguide" have been certified by core customers, and some of the products have been supplied in bulk. At the same time, the related party has strengthened the company's vertical integration precision manufacturing capability and realized the independent control of the key core technologies of the industrial chain. We have raised our forecast for the annual 5G base station construction target of the three major operators to 200000 stations, and the acceleration of 5G construction will greatly boost the company's performance.
We estimate that the EPS from 2019 to 2020 will be 0.25, 0.43 and 0.56 yuan respectively, maintaining the "overweight" rating and maintaining the target price of 19 yuan.
Risk hint: 5G construction progress is not as expected; increased competition in the industry has led to a decline in gross profit margin.
