Company dynamic events

The company released its three-quarter report on October 30, 2019, with revenue of 1.019 billion yuan in the first three quarters, an increase of 0.49% over the same period last year, net profit of 25.6375 million yuan, down 37.00%, and non-return net profit of 52.4078 million yuan, up 20.12% over the same period last year. The revenue in the third quarter was 310 million yuan, an increase of 2.05% over the same period last year; the net profit was-6.5251 million yuan; and the non-return net profit was 14.4755 million yuan, an increase of 16.91% over the same period last year.

Comments on matters

The improvement of product structure and the rise of the copper clad laminate industry drive the company to buckle non-performance companies, including copper foil, copper clad laminate and electronic circuit board. combined with semi-annual report data, copper foil and copper clad laminate business accounts for 70% of the level. In the first three quarters, the company's copper foil production increased by about 10%, and sales increased by about 20%. As the second phase of 8000 tons of high-precision electronic copper foil was put into production in the fourth quarter, the copper foil business will continue to thicken its performance and accelerate the company's performance inflection point.

With the rapid development of 5G base station construction, the copper clad laminate industry has ushered in a high bearing. In the first half of this year, the price of FR-4 copper clad laminate rose by 10% 15%. The company's copper clad laminate business has benefited from the improvement of the industry.

During the period of the company, the gross profit margin was 22.62%, up 7.38 pct from the same period last year; the net profit margin on sales was 2.47%, down 1.54 pct from the same period last year; and the return on net assets was 1.64%, 2.66% in the same period last year. The increase in the company's gross profit margin is mainly due to the product structure focusing on high-margin copper foil products, and the decline in the company's net profit margin is mainly affected by non-recurring profits and losses. The decline in the company's net interest rate affects the level of return on net assets.

The company's asset-liability ratio was 45.90%, an increase of 3.47pct over the same period last year; the current ratio and quick ratio were 1.13 and 0.61 respectively, compared with 1.27 and 0.71 respectively in the same period last year; and the company's inventory turnover days were 220 and 169 in the same period last year. The increase in inventory turnover days is related to the company's capacity expansion plan for the fourth quarter. The number of days of accounts receivable turnover of the company is 109, compared with 131 in the same period last year. The optimization of the index of accounts receivable turnover days benefits from the company's active accounts receivable management strategy.

Pay close attention to the layout of new energy lithium battery 5G high frequency and high speed

The company pays close attention to the market opportunity of new energy and 5G high frequency and high speed. The company's 8000 tons of high-precision electronic copper foil contains nearly 4000 tons of lithium copper foil, of which 6 μ m high tensile products have become an important direction for new energy vehicles to improve energy density, and this product is an important focus for the company's short-term performance. The company and Shanghai Jiaotong University jointly built a joint research center on electronic materials, focusing on the key technologies of 5-10GHz copper foil and substrate materials, so as to provide strong technical support for the subsequent increase of 20000 tons of high-precision copper foil production capacity.

Profit forecast and valuation

Due to the company's high R & D expenses and non-recurring profit and loss in the third quarter, we lowered our performance forecast to achieve operating income of 1.374 billion yuan, 1.762 billion yuan and 2.324 billion yuan from 2019 to 2021, with year-on-year increases of-1.39%, 28.20% and 31.93%, respectively The net profits of shareholders belonging to the parent company were 54 million yuan, 116 million yuan and 168 million yuan, respectively, with year-on-year increases of 57.32%, 113.21% and 45.19% respectively, corresponding to 78x, 37x and 25x of PE, and maintained the "overweight" rating in the next six months.

Risk hint

(1) the utilization rate of copper foil capacity is not as expected; (2) the development of new energy vehicles is not as expected.