Event

The company released its 19-year annual report and 20-year quarterly report on April 21. The company's operating income / return net profit in 2019 was 689 million yuan respectively, an increase of 3.77% and 5.17% over the same period last year.

In the first quarter of 2020, the operating income / return net profit was RMB 164,022 million respectively, an increase of-10.12% and 35.69% respectively over the same period last year.

Q4 performance growth has accelerated, R & D has maintained high investment, and orders from BOE are full:

On a quarterly basis, ① 's 19Q4 revenue / profit reached 1.97 million yuan, an increase of 16.3% over the same period last year and 64.8% in a single quarter. 20Q1, under the background of the overall development of the industry, the revenue side of the company has declined, but the profit side still maintains good growth; from a product point of view, the company's equipment income in 2019 is 661 million, accounting for 96.0% of the total income, an increase of 3.54% over the same period last year, a slight increase; clamp income 16 million, an increase of 78.8%, a rapid growth, but the overall income accounts for relatively small In terms of ② profitability, the company's 19-year gross profit margin / net profit margin was 34.37% and 11.74% respectively, an increase of 0.13/-1.11pct over the same period last year. The gross profit margin remained basically stable, and the decline in net profit margin was mainly due to the increase of 1.13pct in the rate of R & D expenditure; ③ 's R & D expenditure in 2019 was 66.92 million yuan, accounting for 9.72% of income.

By the end of 2019, there were 426 R & D personnel, accounting for nearly 40% of the total number of employees. In terms of specific R & D projects, the company has completed research and development of ACF particle indentation inspection equipment, large-size laminating equipment, COF binding equipment, semiconductor packaging equipment, etc.; 3D curved surface laminating equipment, 15.6inch front and back protective film adhesion machine, polarizer release film after tearing vision software and other projects have completed mass production. Medium-size flexible screen mount technology and semiconductor COW packaging equipment project are still under development, laying a technical foundation for the company to expand the AOI field, OLED field, cut into large-size field, semiconductor field; ④ 2019 Q1-Q4, the company and BOE Group respectively signed tax orders of 0.46, 0.14 and 0.70 million yuan, with a cumulative order of 335 million yuan, including lamination / binding / cleaning and other equipment. In March 2020, the company once again announced that it had signed a 88.7 million tax-free order with Chengdu BOE B7, a total of 2 solid-state optical adhesive machines and polarizer production lines, with full and steady growth of on-hand orders.

The general trend of OLED investment, the company's products gradually break through: compared with the traditional LCD display technology, OLED has many advantages, such as high brightness, high contrast, high color gamut, low energy consumption, flexibility and so on. It is a general trend to replace the LCD panel. With the continuous maturity of OLED technology and the improvement of yield and production capacity, it is judged that its permeability in the end products will continue to increase, and the corresponding demand for OLED module equipment will also increase rapidly. ② according to our statistics, the current domestic OLED production lines under construction / planning include BOE Mianyang, Chengdu, Chongqing, Fuqing Line, Tianma Wuhan Line, Huaxing Optoelectronics Wuhan Line, Shenzhen Line, Hehui Shanghai Line, Weixin Nuoguan Line, Hefei Line, Huike Chief Sha Line, Ruoyu Shenzhen Line, etc. A total of 12 production lines, single-line production capacity is mostly 48K/ month or 30K/ month. According to the calculation of the equipment value of 25 module lines and single module line corresponding to 48K production line, the number of domestic module lines is expected to reach about 120 million in the next 3 years, and the value of corresponding module equipment is about 280,33 billion.

Considering the above panel production line production plan, it is judged that the domestic module equipment market space in 2020-2022 is about 60-7 billion, 100-11 billion and 13 billion respectively, while the domestic module equipment market space in 2019 is only about 30-4 billion, which shows the rapid growth of the market; while the ③ market is growing, the localization rate of module equipment is also increasing rapidly. As the domestic leader of module segment fitting equipment, in 2019, based on the advantages of the original small and medium-sized equipment module market, the company carried out the research and development of large-size module bonding equipment and the expansion of the whole line of TV module, and the market share is still further improved.

In addition to 3C equipment, actively cultivate new business growth points such as automotive electronics and semiconductor packaging equipment: while ① continues to strengthen equipment research and development in the field of module assembly at the back of the panel, the company actively expands the application market of semiconductor packaging equipment products in emerging fields, while seizing the opportunity to enter the field of automotive electronics to enrich product categories through multi-dimensional product layout to form a stable and sustainable development platform. In the field of automotive electronics, ② established a preliminary business relationship with Continental Group at the end of 2018. Based on the company's previous investment in research and development and solid technology reserves, it has been recognized and opportunity by Continental Group. In 2019, the company signed sales orders with Continental Group totaling 75 million yuan (including tax), including Daimler MRA2-Backlight line, FPK MEDIUM backlight, BMW AZV Dry Bonding line, AUDI VPE/PPE-backlight assembly line and so on. In addition to Continental Group, the company has also signed orders with Bosch Group, and customer resources are increasing; ③ in the field of semiconductor packaging equipment, the company's current research and development achievements have semiconductor flip equipment and SFO optical system testing machine equipment, the above-mentioned products have completed prototype debugging, the precision of the equipment has reached the mass production standard and has been verified by downstream customers.

Investment suggestion: with the gradual improvement of the yield of OLED panel enterprises and the increase in the demand brought about by the improvement of the permeability of downstream OLED products, China has gradually entered the construction process of the module line in the rear section of OLED, driving the demand for module equipment in the latter section. It is estimated that the domestic module equipment market space from 2019 to 2022 is about 30-4 billion, 60-7 billion, 100-11 billion and 13 billion respectively, which is in the stage of rapid growth. The company remains a leader in the field of module fitting equipment, and is expected to cut into other equipment links, bringing new profit growth points. In addition to 3C equipment, the company is also actively cultivating automotive electronics, semiconductor packaging equipment, and so on. It is estimated that the income of the company from 2020 to 2022 is 1.49 billion yuan, and the net profit is 1.42 billion yuan, corresponding to the closing price on April 22, 2020, and the valuation is 28.8x/20.2x/14.6x from 2020 to 2022, maintaining the "buy" rating and the target price.

Risk factors: the risk of intensified competition in panel module equipment