The sales and gross profit of photovoltaic germanium and infrared germanium increased greatly in the first half of 2020, and the company's net profit increased by 173.3% compared with the same period last year, of which the revenue and net profit in the second quarter continued to reach the highest level in nearly two years. With the rapid growth of gallium arsenide / indium phosphide semiconductor sales, the supply and demand pattern of superimposed germanium is expected to improve, germanium prices are expected to continue to rebound, the company's performance has entered a period of rapid growth, maintaining the company's "buy" rating.
The performance was in line with expectations, with an increase of 173.3% in the first half of 2020 compared with the same period last year. In the first half of 2020, the company achieved operating income of 357 million yuan, + 55.26% of the same period last year, and net profit of 6.05 million yuan, + 173.3% of the same period last year.
In the second quarter of 2020, the company achieved an operating income of 194 million yuan, a month-on-month ratio of + 20.63%, a net profit of 4.82 million yuan and a month-on-month ratio of + 292%, and the net profit continued to improve. The reasons for the half-year performance increase: 1) the output and unit price of photovoltaic germanium / infrared germanium increased compared with the same period last year, 2) the sales of semiconductor materials increased and the proportion of high-end products increased, and 3) the management cost was 24 million yuan, down 20.8% from the same period last year.
Infrared germanium and photovoltaic germanium sales / gross margin increased greatly, waiting for the germanium price to rise to improve the germanium gross margin of the material. In 2020, the output of H1 company's material grade / photovoltaic grade / infrared grade / optical fiber grade germanium products was 15.1 tons / 19.68 million films / 2.79 tons / 71.8 tons, respectively, and the corresponding sales volume was-11.3%, 621%, 21.6% and 7.6% respectively compared with the same period last year, and the gross profit margin changed respectively-1.8/+35.9/+12.77/-1.8pct. Among them, infrared germanium and photovoltaic germanium are driven by demand, sales and gross profit margin are significantly increased. Affected by this, the overall gross profit of the germanium plate was 39 million yuan, up 20.67% from the same period last year. As of August 20, the price of germanium has risen to 6900 yuan / kg. We expect that driven by 5G construction in the future, the supply and demand pattern of germanium will improve, the price of germanium will continue to rebound, and the gross profit margin of optical fiber germanium and material grade germanium is expected to pick up.
The rapid growth of sales of semiconductor materials will be the main driving force driving the company's performance in the future. In 2020, H1 Company produced 103700 gallium arsenide + indium phosphide single crystals (equivalent to 4 inches), an increase of 148.7% over the same period last year. Among them, the proportion of products used in radio frequency devices increased, the unit price of semiconductor materials increased by 184% compared with the same period last year, and the gross profit margin rose sharply to 22.2%. The semiconductor material H1 contributed a gross profit of 7 million yuan in 2020, an increase of 10 million yuan over the same period last year. The company now has 800000 pieces of gallium arsenide (equivalent to 4 inches) and 50,000 pieces of indium phosphide (equivalent to 2 inches). Benefiting from the independent and controllable trend of the semiconductor industry chain, it is expected that the company's sales of semiconductor materials in 2020max 2021 will be 32.29x650,000, which is expected to become the main growth point of future performance.
Risk factors: germanium prices fluctuate, sales of germanium products fall short of expectations, sales of gallium arsenide semiconductors fall short of expectations.
Investment suggestion: it is expected that the supply and demand pattern of germanium will improve, and the price of germanium is expected to hit bottom and rebound. The company has sufficient production capacity of gallium arsenide semiconductors and is expected to show a rapid growth trend due to the independent and controllable trend of the semiconductor industry chain.
We maintain the return net profit of the company from 2020 to 2022 is 0.37 RMB 105pm, corresponding to the 2020-2022 EPS forecast of 0.06pm 0.16max 0.30 yuan respectively. Maintain the company's "buy" rating.