The semiconductor industry chain has shifted to China, rapidly increasing the demand of the domestic target market. The company's target expansion project is about to be completed, the target business ushered in a historic opportunity, the future performance is expected to be released quickly. The company belongs to the New Materials Company, which is currently at a historical low valuation. Considering the continued high growth of the company's performance in the future, the company will be given a "buy" rating of 1 times PEG in 2020, corresponding to a share price of 17.9 yuan, covering for the first time.
The company is a leader in new materials with profound technical background. The company's business is divided into four parts of "electromagnetic optics". At present, it is mainly engaged in the R & D and preparation of new materials such as ultra-high purity metals and rare and precious metal materials, microelectronic optoelectronic thin film materials, high-end rare earth functional materials, biomedical materials, infrared optics and optical fiber materials.
Semiconductor production capacity has shifted to China, and the demand for domestic targets has doubled in the next three years. The region with the fastest growth in global semiconductor production capacity in the next three years is Chinese mainland, and the mainland's 12-inch wafer foundry capacity is expected to grow by 33% from 2017 to 2021. The target market is expected to reach 2.56 billion yuan in 2021, double that in 2018.
At present, the market share of domestic targets is low, and the rapidly growing demand in the future will bring historic opportunities for domestic manufacturers.
The technical advantages of high-purity targets are obvious, and the expansion project will start next year to rapidly boost the company's profits. The company is the technical leader of domestic copper-cobalt targets, especially through the production technology from raw materials to high-purity copper-cobalt targets. We calculate that our products have a 50% price advantage over our peers. At present, the target expansion project of the company is about to be put into use, and we expect that the target project will contribute about 1.1 billion yuan in revenue and 590 million yuan in gross profit to the company after reaching production.
The high-end magnetic materials industry continues to boom, and the production capacity of rare earth magnetic powder doubles to support performance growth. Wind power, new energy vehicles and other fields have maintained double-digit growth, driving the market demand for high-end magnetic materials. The company's rare earth materials research and development strength is strong, rare earth magnetic powder production capacity is about to be released, the future is expected to enjoy the performance of the boom industry.
Risk factors: the prosperity of the semiconductor industry is not as good as expected, and the release of target production capacity is not as expected.
Investment suggestion: it is estimated that the net profit of the company belonging to the parent company from 2019 to 2021 is RMB 1.06 billion, the corresponding EPS is RMB 0.12, 0.22, and the CAGR is as high as 81% in 2019-2021. The company belongs to the new materials company and is currently at a historical low valuation. considering the continued high growth of the company's performance in the future, the company will be given a "buy" rating of 1 times PEG in 2020, corresponding to a share price of 17.9 yuan, covering for the first time.
