Incident: On April 30, 2020, the company released its 2019 annual report and 2020 quarterly report.
In 2019, the company achieved operating income of 3.727 billion yuan, an increase of 1.95% over the previous year; net profit attributable to shareholders of listed companies was 526 million yuan, a decrease of 6.16% over the previous year; net profit attributable to the mother after deduction was 497 million yuan, a decrease of 7.17% over the previous year. In Q1 2020, the company achieved total revenue of 932 million yuan, up 2.94% year on year; net profit attributable to shareholders of listed companies was 126 million yuan, up 1.61% year on year; net profit returned to the mother after deduction was 105 million yuan, down 11.25% year on year.
The market structure continues to be optimized to further advance the strategy of large customers. The company has continuously increased its domestic market development efforts in recent years. In 2014-2019, the share of sales in mainland China increased from 19.71% to 27.57%, making it the company's largest sales area. This helps the company hedge against the risk of fluctuations in international trade frictions. In 2019, batch orders from major domestic customers were gradually released, and domestic market revenue continued to grow rapidly. The company further promoted sales strategies for major customers in the industry and strengthened cooperation with the world's top 500 and leading companies in various industries. According to the company announcement, in terms of 5G customers, the main customers the company cooperated with were ZTE, Fenghuo Communications, Putian, CommScope (CommScope), Gaoyi (II-VI), Calix, Broadcom (Broadcom), Xuchuang Technology, etc., and continued to introduce Intel (Intel) and Samsung Electronics (Samsung) ), strategic customers such as Sumitomo Electric (SUMITOMOELECTRIC) and Lixun Precision.
In line with the 5G communication trend, R&D investment has increased dramatically. 2019 was the first year of 5G construction and commercialization in China. The company's R&D investment on 5G increased dramatically. Among them, R&D expenses increased 28.20% year-on-year. The company successfully achieved mass production of high-density high-speed multi-layer boards used in supercomputers and 5G base stations. At the same time, the company also continued to increase R&D investment in 5G-related products, especially in applications such as communication transmission networks, core networks, and data centers. The company stated on the Panorama Interactive Platform in April 2020 that 5G orders are growing rapidly. We expect that with the accelerated construction of 5G communication networks and the rapid growth of the subsequent application industry, the company is expected to enjoy 5G dividends.
Production and sales conditions are good at various factories, and investment expansion is progressing steadily. In 2019, the company produced and sold an area of 2,929,900 square meters of PCBs and 2,9291 million square meters respectively, with a production and sales rate of 100.01%. Shenzhen Chongda successfully introduced ZTE in the second half of 2019 and entered the 5G fast track, laying a solid foundation for future performance guarantees. Jiangmen Chongda No. 2 is an IPO fundraising project. Sales in 2019 were constrained by a decline in the boom in industrial HDI, and production capacity was not fully released. In order to improve capacity utilization, the company has accelerated the introduction of consumer HDI products and other high-end PCB products. Dalian Chongda mainly produces a variety of 2-6-layer small-batch PCB products, with a high capacity utilization rate. According to the announcement, Phase II is currently being prepared, and it is expected that production capacity will continue to increase in the future.
According to the announcement, the company has arranged to hold 40% of Sandeoguan's shares and 40% of Pnovo's shares, expanding its products to FPC, IC carrier boards, etc., to achieve coverage of a full range of PCB products. One-stop products covering the entire product line can meet the needs of customers for different types of products, thereby enhancing the competitiveness of the company's products.
Investment advice: We expect the company's revenue for 2020-2021 to be 4.628 billion yuan and 5.639 billion yuan respectively, and net profit attributable to shareholders of listed companies is 665 million yuan and 863 million yuan respectively, giving it a buy-A rating.
Risk warning: risk of cyclical fluctuations in macroeconomics and downstream industries, risk of fluctuations in raw material prices, risk of exchange rate fluctuations