occurrences
The company released its 2019 three-quarter report on the evening of October 20. The 2019Q3 company achieved revenue of 74.05 million yuan in a single quarter, an increase of 13% over the previous year; achieved net profit of 28.61 million yuan, an increase of 18% over the previous year; and achieved net profit of 28.42 million yuan after deduction, an increase of 25% over the previous year.
Brief review
Performance is growing steadily, and electronic functional materials are gradually breaking through
Q3 The company's performance increased relatively large year-on-year in a single quarter, mainly due to: ① the company's revenue increased year-on-year, while gross margin was basically the same (19Q3 59.53%, 18Q3 59.56%), resulting in a year-on-year increase of 5.08 million yuan; ② the three fees, taxes and surcharges totaled 10.4 million yuan, a year-on-year decrease of 1.96 million yuan; ③ the total decrease in asset, credit impairment losses and investment income by 2 million yuan; ④ an increase of 350,000 yuan in income tax. All of the above items increased net profit by 4.69 million yuan, which is close to the increase in the company's net profit of 4.36 million yuan. The increase in the company's performance was mainly contributed by the expansion of the scale of business and the expansion of the scale of revenue. According to the company's previous performance forecast, the increase in revenue was mainly contributed by further breakthroughs in electronic functional materials, and information anti-counterfeiting materials remained stable.
On a quarterly Q3 month-on-month basis, since Q2 is the company's traditional low season (the company's Q2 performance over the years has been low), Q3 performance increased significantly month-on-month. Revenue increased 44% month-on-month, and Guimu's net profit increased 57% month-on-month.
The traditional information anti-counterfeiting materials sector provides the company with abundant cash flow
Products in the corporate information anti-counterfeiting materials sector mainly include products such as thermal magnetic tickets and magnetic stripes. Thermal magnetic tickets are mainly railway and train tickets, which are common blue magnetic tickets; magnetic stripe products are common magnetic stripe cards, which are widely used downstream in commercial retail, transportation, finance, social security and other fields. In terms of thermal magnetic tickets, the company is the first domestic company to produce thermal magnetic tickets, and is currently the largest thermal magnetic ticket manufacturer in China. In terms of magnetic stripes, the company accounts for more than half of the domestic market share, and is also one of the top four international magnetic stripe manufacturers.
Although the growth of the traditional business sector is weak and is facing replacement by e-tickets, EMV migration, etc., it is still the company's cash bullish product, which enables the company to maintain a gross margin of about 60% and ROE of about 20%, and brings about 110 million dollars in cash flow to the company every year, which not only brings rich profits to the company, but also provides sufficient capital for the company's transformation.
Electronic functional materials open up space for future growth
As the company's traditional business hit the ceiling of the industry, the company gradually began to lay out the electronic functional materials sector in 2018: in August 2018, the company announced that it would stop implementing the “Thermal Magnetic Ticket Production Line Expansion Project” and signed an investment agreement with Sichuan Chengmei Petrochemical Park to build an electronic materials R&D industrial base at Chengmei Petrochemical Park, focusing on electromagnetic shielding films, pressure test films and other products. The total investment is 500 million yuan. The construction period is 3 years, reaching an annual output value of 400 million yuan after delivery and annual tax revenue of 22.5 million yuan after delivery.
The downstream electromagnetic shielding film is mainly used in flexible circuit board FPCs. Since 5G signal crosstalk problems are prominent, the amount of electromagnetic shielding film used in FPCs will increase, leading to high demand growth. According to the MarketsAndMarkets report, the global electromagnetic shielding market will grow from US$6.3 billion in 2019 to US$8.2 billion in 2024, with an average annual growth rate of 5.34%; while the market space for electromagnetic shielding films for FPC will reach nearly 4 billion yuan in the future. In terms of the domestic market, the average annual growth rate of China's electromagnetic shielding film market reached 21% in 2014-2017, and is expected to maintain a growth rate of nearly 20% in the next few years.
A pressure test film is a material that can accurately measure pressure level, pressure distribution, and pressure balance. Downstream is used for condition evaluation of production and testing equipment in various fields such as liquid crystal displays, semiconductors, electronic circuit industries, mechanical equipment, etc. Major global manufacturers of pressure test membranes include Tekscan (USA), Fujifilm Corporation (Japan), Sensor Expert (USA), and Bestech Australia Pty.Ltd (Australia).
Domestic products are highly dependent on imports. In the current context of localization of panels and semiconductors, the company's pressure test films will benefit from both the incremental market and the import substitution market.
At present, some of the company's new products, such as electromagnetic wave shielding films and pressure test films, have been partially sold.
The company's net profit returned to the mother in 2019 and 2020 is estimated to be 110 million and 170 million yuan respectively, corresponding to PE 24X and 16X, maintaining the increase rating.
