The net profit of the electronic sector contributed more than 50%, and successfully achieved strategic transformation. Hangjin Technology was listed on the Shenzhen Stock Exchange in 1997. The current business covers two major sectors: (1) Electronic sector: Shaoguang and Welco Electronics were successfully acquired in the second half of 2017. Currently, it focuses on the two major fields of high-end chips and communications. The products cover the three directions of GPU/FPGA/memory chip/bus interface chip, Beidou-3 chip, and radio frequency communication. (2) Chemical sector: The company's traditional business includes caustic soda, liquid chlorine, benzene chloride, propane oxide, polyether, and polyvinyl chloride. The main sales targets include downstream product manufacturers such as chemical fibers, pharmaceuticals, polyurethane, and construction.
According to the 2019 performance report, the chip business's net profit contribution reached 181 million yuan, accounting for 57%. It has become the company's largest source of net profit, and the company has successfully achieved strategic transformation. In 2019, the company further expanded the development field of dual-use chips. Based on the company's R&D technology reserves and industrial collaborative development plans, the company focused on three major chip fields, including GPU/FPGA, the Beidou navigation chip industry chain, and 5G communication radio frequency, to carry out a horizontal layout.
Using Changsha Shaoguang and Weike Electronics as platforms to create a dual-core industrial layout for the high-end chip/communications industry, the company's electronic division mainly revolves around products in the two major fields of high-end chips and the communications industry. Among them, the high-end chip field is mainly developed through Shaoguang, Changsha: (1) Its GPU products have now been domestically produced and supplied with highly reliable information equipment. On December 20, 2019, the second-generation improved graphics processing chip independently developed by Shaoguang received the first purchase order of 59.8 million yuan from Hunan Shengyun Optoelectronics; (2) Its XXXX FPGA chip is 8000 The gate is a programmable logic device with high reliability, and can achieve data storage and program storage in aerospace weapons and equipment. On December 26, 2019, Shaoguang's FPGA chip received an order of 28.325 million yuan from China's X Group A Research Institute; (3) it holds 27.66% of the shares of the Wuhan Navigation Institute through two equity transfers. Up to now, the Wuhan Navigation Institute has successfully developed the Beidou3 baseband RF integrated chip.
The communications industry is mainly developed through Wolters Kluwer Electronics. The subsidiary has LTCC-MCM production process technology in the field of thick film hybrid integrated circuits. The level is advanced, the consistency is high, and it has rich sales channels and a good reputation in the industry in military fields such as aerospace and weapons equipment. In November 2019, the company established a new holding company, Wolco Radio, and in February 2020, it held Honglin Wei. It began to work on high-end RF materials, radio frequency core modules, devices, and base station antennas. In the future, the company's synergistic effects in the high-frequency RF field will be further enhanced.
Profit prediction and rating: The company's electronic sector has become the largest source of net profit, and the chairman's report on increasing holdings shows confidence. Although net profit declined slightly in the 2019 performance forecast, it is mainly due to a decline in the performance of the chemical sector. Chemical prices are expected to rise, and the military sector is expected to continue to grow. The revenue growth rate for 2019-2021 is -1.08%/14.46%/14.57%, revenue is 37.84/43.31/4963 billion yuan, Guimu's net profit is 3.17/4.18/517 billion yuan, EPS is 0.46/0.61/0.75 yuan, PE is 50.58/38.33/31.0x, adopted According to the comparable valuation method, the average PE value of comparable companies in 2020 was 50.67x, and the target price was 0.61*50.67 = 30.91 yuan, maintaining the purchase rating.
Risk warning: There is a risk of declining chemical prices, low demand for civilian chip products, and delays in military delivery.
