Items:
The company issued an announcement: (1) in the first three quarters of 2019, the operating income was 632 million yuan, + 14.50% compared with the same period last year, and the net profit was 23 million yuan,-3.46% compared with the same period last year. In the third quarter, the operating income was 243 million yuan, + 34.69% year-on-year, + 8.87% month-on-month, and the net profit was 6 million yuan, + 5.85% year-on-year, and-45.36% compared with the same period last year. (2) considering the influence of macro policy, market environment, financing cost and financing period, the company stops issuing convertible bonds. (3) the company intends to change the initial public offering capital of 77.5322 million yuan for the "ABP project" and "payment de Qingke Sai 51% equity acquisition price".
Comments:
The boom of the main modified plastics is low, and the sales of 5G materials are growing rapidly. The automobile and home appliance market shows a slowdown or even decline, the company to expand and deepen customer cooperation, modified plastics business to maintain a relatively stable sales scale and profit level. In terms of 5G materials, (1) the company acquired all the businesses of Samsung Precision LCP in 2014, and it is the only company in the world that can continuously produce 3 models of LCP resin and composite materials, with existing production capacity of 3000t/a. In the first half of this year, the company's connector sales with LCP particles were eye-catching, with sales of + 108 per cent. In addition, LCP membrane is the best choice for 5G mobile phone antenna materials, and the company's film-grade LCP is in the process of breaking through and is expected to achieve import substitution. (2) PTFE is the best filling material for 5G base station PCB, with a space of nearly 13 billion. Deqing Kesai acquired by the company already has the mass production capacity of PTFE film, and the product is currently in the downstream verification stage. With the acceleration of 5G pre-commercial use and import substitution, the company as a domestic LCP and PTFE leader is expected to benefit greatly.
In the third quarter alone, the quarter-on-quarter decline was mainly due to the reduction of government subsidies, which is optimistic about the improvement of profitability brought about by the improvement of LCP and PTFE capacity utilization. The company's gross profit in the third quarter was 42 million yuan, + 6.90% compared with the previous quarter, which is consistent with the increase in revenue. The homing net profit fell 45.36% from the previous quarter, mainly due to other income of 1 million yuan in the third quarter, compared with 5.73 million yuan in the second quarter. In addition, management and R & D expenses also increased. The company's gross profit margin reached 17.36% in the first three quarters, an increase in 0.49pct over the same period last year, of which the gross profit margin in the third quarter was 17.12%, an increase in 1.18pct over the same period last year. We think it is mainly due to the increase in the proportion of sales of 5G materials. With the increase of the company's LCP sales, the profit and loss of Jiangsu water special materials, as the main body of the company's LCP R & D and production, is gradually narrowing. With the increase of LCP production load and the volume of PTFE, the company's profitability is expected to improve significantly.
It is proposed to change part of the raised funds for the construction of the ABP project to speed up the industrialization of the company's R & D reserves. The headquarters of the company is obtained through leasing, the construction of headquarters will improve the operational efficiency of the company, integrate and optimize R & D resources, strengthen innovation strength, and meet the future growth of site demand. After the completion of the project, the company is expected to give full play to the advantages of its own property, upgrade the construction standards of the company's existing academician workstations and engineering technology research centers, and promote the transformation of more intellectual resources and enhance the R & D strength and competitiveness by promoting the construction of high-frequency communication materials R & D centers, sensor materials R & D centers and lightweight materials R & D centers.
Profit forecast, valuation and investment rating. We maintain the forecast of the company's 19-21 net profit of 0.42 billion yuan and 0.53 billion yuan respectively, the corresponding EPS is 0.35 billion yuan and 0.45 billion yuan respectively, and the current stock price corresponds to PE times 69-54-44; combined with next year's results and 60X PE level expectations, we adjust the target price to 26.86 yuan and maintain the "recommended" rating.
Risk tips: a sharp decline in product prices; project construction and production are not as expected; safety and environmental protection risks.