1~3Q2019 performance is in line with our expectations
Shanghai Xinyang announced 1~3Q19 results: operating income was 456 million yuan, an increase of 15.73% over the same period last year; net profit from home was 290 million yuan, an increase of 292 million yuan over the same period last year, corresponding to 1.49 yuan per share, in line with our expectations. The sharp increase in the company's net profit from the same period last year was mainly due to the substantial increase in investment income caused by the transfer of shares in Shanghai Xinyi in 2019, while the investment income of 1~3Q19 increased by 301 million yuan compared with the same period last year.
3Q19 achieved revenue of 178 million yuan, an increase of 25%, 22%, and a net profit of 12.69 million yuan, a decrease of 22%, 95%. The sharp decline in net profit from the previous month was mainly due to the higher return on investment caused by the transfer of shares in Shanghai Xinyi by 2Q19.
Trend of development
Ultra-pure chemicals continue to grow at a high rate, and the paint business has achieved rapid growth. Sales of 1~3Q19 's semiconductor business declined slightly, mainly due to a decline in sales of conventional chemicals affected by the decline in the semiconductor industry, and ultra-pure chemicals continued to grow at a high speed. The company's fluorocarbon coatings business to speed up the transformation and upgrading, continue to develop and improve energy-saving, environmental protection, high-quality and efficient fluorocarbon powder coatings, and extend to the downstream of fluorocarbon coatings, 1~3Q19 coatings business to achieve rapid growth.
It is planned to invest in the construction of a second production base in Hefei to expand the production capacity of semiconductor materials. The company signed a cooperation agreement with the management committee of Hefei Xinzhan High-tech Industrial Development Zone to build a second production base for semiconductor materials in Hefei. The project is planned to be carried out in two phases, with a total investment of 600 million yuan, including an investment of about 300 million yuan in the first phase. the main construction chip copper interconnection ultra-high purity electroplating solution series products 4500 tons, chip high-choice ultra-pure cleaning solution series products 8500 tons, chip high-resolution photoresist series products 500 tons. Chip-level packaging and integrated circuit traditional packaging pin surface treatment of functional chemical materials 1500 tons, the first phase of the project is scheduled to be completed and put into production within three years.
Profit forecast and valuation
We keep our 20-year net profit forecast for 2019 big unchanged. The company's current share price corresponds to a price-to-earnings ratio of 24.5 pound 86.4x in 2019 / 20. Due to the upward movement of the valuation center of the industry, we have raised our target price by 9.1% to 36 yuan, which is 5% lower than the current share price. The target price corresponds to the 2019 20-year price-to-earnings ratio of 23max 82x, maintaining a neutral rating.
Risk
The growth of ultra-pure chemicals is lower than expected, and paint profits continue to decline.