Core viewpoints

Event

According to the company's semi-annual report for 2020, the operating income in the first half of the year was 643 million yuan, an increase of 18.15% over the same period last year; the net profit of shareholders belonging to listed companies was 145 million yuan, an increase of 21.05% over the same period last year; and basic earnings per share was 0.36 yuan per share, an increase of 8.24% over the same period last year.

Comment

The income and profit of H1 increased simultaneously, and the profitability did not decrease under the epidemic. The company's operating income in the first half of the year rose with the net profit of shareholders belonging to the parent company, and the profit growth rate was higher than the income growth rate, with year-on-year changes of + 18.15% and + 21.05%, respectively. Gross profit margin and net profit margin reached 33.10% and 22.53%, respectively, with year-on-year changes-3.33pct and + 0.54pct. Q2 single quarter, revenue and return net profit change + 23.86%, + 11.23%, mainly due to the company's order growth, full production; month-on-month change of-2.87%,-33.46%, mainly affected by consumer electronics seasonal fluctuations. The main reasons for the improvement of the company's profitability in the first half of the year are: (1) the company focuses on the field of consumer electronics, and customers include multi-brand smartphones such as Samsung, Huami OV and tablet computers such as Apple Inc, which has obvious advantages in downstream customer resources and has the production advantage of full-process development and operation. (2) with the rise of the online economy under the global epidemic, the sales of tablets and laptops have increased, driving the growth of orders from upstream structural component manufacturers. (3) during the epidemic period, the company put the prevention and control in place, paid close attention to the resumption of work and production, and the production capacity recovered quickly and achieved good economic benefits.

The 5G cycle is delayed but the growth logic remains, and the metal frame still enjoys a broad market. Aluminum structures are widely used in the consumer electronics market, including smartphones, tablets and laptops. With the accelerated development of 5G, the metal frame structure mobile phone has gradually replaced the all-metal integrated body to become the mainstream design of the smartphone industry, and the high-strength aluminum alloy frame + glass or ceramic backplane has become the common configuration of the flagship model. The permeability of metal frames is expected to increase rapidly from 5 per cent in 2016 to 40 per cent in 2020, becoming the mainstream application in the next 3-5 years, and the global market is expected to be about 130 billion yuan in 2020. Affected by the epidemic in 2020, the consumer demand for 5G mobile phones was frustrated, but the market stock was still there, and the long-term demand was delayed. In July, the proportion of domestic 5G mobile phone shipments increased to 62.38%. With the recovery of overseas outbreaks, the global stock market is still waiting to break out.

The epidemic spawned the online economy, and the demand for laptops and tablets increased. Under the global epidemic, online application is becoming more and more normal, online office, online education and so on give rise to new demand for tablets and laptops. Q2 global PC shipments of 72.26 million units, year-on-year + 11.41%, month-on-month + 35.73%; global tablet shipments of 38.6 million, year-on-year + 18.60%, month-on-month + 56.91%. The company provides aluminum structures for Apple Inc MAC series and iPad series, benefiting from the good sales performance of H1 Apple Inc Mac and iPad; the company cooperates well with downstream customers, seizing the opportunity of improving online demand to speed up the research and development of new machine materials, as of the first half of the year, the company has completed six major scientific and technological innovation projects, four projects have entered the stage of mass production, and speed up the research and development of future applications of metal materials.

Profit forecast: the company's operating income from 2020 to 2022 is estimated to be 16.46,21.04 and 2.644 billion yuan respectively, and the net profit of shareholders belonging to listed companies is 3.41,4.39 and 545 million yuan respectively. EPS is 0.85,1.09,1.36 yuan per share, corresponding to PE is 36,28,22 times, continue to be given "overweight" rating.

Risk hint: customers and brands are relatively concentrated in risk, and the impact of overseas epidemic on demand.