There is huge room for development in the semiconductor engineering market

Currently, it is estimated that the total semiconductor engineering construction market capacity is 20 billion yuan to 30 billion yuan. Among them, the semiconductor engineering construction design and criticism business had a historical market capacity of 3-4 billion yuan. However, using two policies to support development plans and the impact of trade frictions has brought broad development space to domestic semiconductor engineering construction. If 10% export substitution occurs, it can drive an investment of 150 billion US dollars, so the semiconductor engineering market has broad prospects.

The construction of the photovoltaic power plant project is poised to begin

Continued optimization of the photovoltaic power generation environment is being promoted as power reform continues to deepen and the problem of power abandonment and electricity restrictions gradually improves. It is expected that the new domestic PV market will maintain a certain size in 2020 and 2021. Not relying on subsidies during the “fourteen losses” period will free photovoltaics from the restrictions of total volume control, and the new installed equipment market will rise steadily. Investment in the construction of photovoltaic power plants will also increase further.

Strong rise in logistics and warehousing engineering construction

Although China's total storage and construction area is currently very high, judging from the per capita level, as of 2018, China's logistics real estate space per capita was only 0.7 square meters/person, significantly lower than Japan (4 square meters/person) and the US (3.7 square meters/person), and the level of e-commerce development in China is not lagging behind Japan and the US, so the demand for secondary logistics storage should not be comparable, so there is still a lot of room for development in China's storage and construction.

The amount of fixed asset investment in the storage industry continued to show explosive growth from 2005 to 2015, with an average annual growth rate of over 30%, and remained stable at a high level until 2015. Currently, annual fixed asset investment has a history of 650 billion yuan. Therefore, the current demand for secondary storage and construction projects is very broad.

The company has excellent construction qualifications and excellent partners. The company also has 4 national design masters, 8 design masters from Sichuan Province, who enjoy special government allowances and 23 families and a “Level 1 General Contracting Qualification for Housing Construction Projects”. In the construction of high-tech electronics, biomedicine, photovoltaics, and logistics storage projects, the company undertook orders from leading enterprises in the industry and completed projects excellently, winning many national and provincial architectural design awards. At the same time, the company has 4 national design masters, 8 design masters from Sichuan Province, enjoying special government allowances and 23 families, and 300 senior researchers. Registered in multiple countries A highly skilled industry team with engineers as the main body. A large amount of R&D expenses is invested every year to protect the company's development.

The company's various businesses continue to grow

The company's engineering technology business achieved revenue growth rates of 44% and 16% respectively in 2018 and 2019, achieving a sharp leap in performance; the semiconductor business achieved revenue of 4.307 billion yuan in 2019, an increase of 4.40% over the previous year; the total installed capacity of the photovoltaic business reached 311.82 megawatts in 2018, an increase of 10.89% over the previous year, and achieved revenue of 318 million yuan, an increase of 26.6% over the previous year, and achieved revenue of 405 million yuan in 2019, an increase of 27.3% over the previous year.

Profit forecasting and investment ratings

We expect the company's revenue for 2019-2021 to be 169.22, 200.15 and 23.270 billion yuan respectively, up 8.1%, 18.3% and 16.3%, respectively, and net profit of 627, 736 and 875 million yuan respectively, up 9.4%, 17.4% and 18.9%, respectively. The EPS for 2019-2021 is expected to be 0.30, 0.35, and 0.42 yuan, respectively, and the corresponding PE is 35/30/25x, respectively.

The company's engineering business relies on the three pillars of high-tech electronic engineering, logistics storage engineering, and photovoltaic power plant engineering to maintain relatively rapid revenue growth over the next three years. At the same time, the order volume of the company's semiconductor packaging and testing business is stable and growing steadily. We expect that the company's overall operating income will continue to grow to a certain extent over the next three years, and that profit and revenue will also continue to grow steadily after deduction. Combining the valuation levels of the engineering and construction industry and the semiconductor industry, we gave the company 32-35 times PE in 2020, corresponding to a reasonable valuation range of 11.18 to 12.22 yuan, maintaining the “buy” rating.

Risk warning

1. Poor signing of new business orders led to lower revenue confirmation expectations; 2. Project quality and project safety risks;

3. PV engineering policy risks;