Main points of investment

Event: the company's 2020H1 achieved a total revenue of 1.47 billion yuan per year, an increase of 61.87% over the same period last year, and a net profit of 171 million yuan, an increase of 9.5% over the same period last year. Dagger 20Q2 realized revenue of 894 million yuan, an increase of 64.77% over the same period last year, and a net profit of 127 million yuan, an increase of 10.65% over the same period last year.

Profitability has been greatly affected by the Q1 epidemic, and the entry of Q2 into normal operation has been significantly improved. The epidemic affected the company's Q1 production and operation. Q1 revenue / net profit / deducted non-return net profit was + 57.6% / 6.21% / 9.07% respectively compared with the same period last year, and the gross profit margin / net profit rate was 22.4% / 7% respectively, which decreased 8pct/4.3pct respectively compared with the same period last year. After March, the company basically returned to normal production, and its performance increased significantly compared with the same period last year. Q2 realized operating income / deducted non-return net profit of 894 million yuan / 91.9907 million yuan respectively, year-on-year + 64.77% 4.89pct/-7.21pct 39.17%, gross profit margin / net profit respectively 27.7% / 15.1%, although year-on-year-4.89pct/-7.21pct However, after ending 19Q2's record high gross profit margin, 20Q2 has seen a trend of improvement in profitability due to the continuous decline in net gross profit margin during the convergence period of 4G/5G products, which returned to the average level of Q3 last year.

The products of thermal conductive materials and devices are growing rapidly, and the growth of communications / computer business makes up for the decline in mobile phone business. In terms of products, 20H1 electromagnetic shielding materials and devices, thermal conductive materials and devices, protective functional devices, base station antennas and related devices accounted for 33.44%, 31.85%, 20.28% and 12.69%, respectively, and revenue growth was 35.9%, 250.4%, 165.9% and-7.7%, respectively. The revenue growth and share of thermal conductive materials and devices increased 162pct and 12.6pct respectively compared with the same period last year, which is the main contribution to the growth. From a sub-sector point of view, mobile phone business is affected by a significant decline in global mobile phone shipments, while high-value products such as VC have not yet been shipped in bulk, and overall revenue has declined compared with the same period last year.

Due to the large-scale laying of domestic 5G base stations, the company's 5G antenna vibrators, radome components, phase shifter media and other products have passed the certification of Ericsson and other important communications customers. The growth of computer business is mainly driven by the increased demand for online offices caused by the epidemic. The promotion of new energy vehicle business is smooth, has obtained the certification qualifications of a number of new energy vehicle manufacturers, and began to supply small quantities, which is expected to become a long-term driving force for growth.

Customer certification and proofing testing continue to advance, the downstream market continues to expand. In terms of communication base station business, the company's special radiator successfully entered the customer resource pool; the inflating plate and radome obtained customer A supplier qualification and entered mass production; Bowei communication business relationship expanded from overseas customized cooperation to comprehensive cooperation in domestic and foreign markets; at the same time, C customer JDM factory preparation was completed and has won the bid and put into production; Runxingtai's delivery performance on A customer 5G3.0 project has been fully recognized by customers. In terms of computer business, the company's wave edge box project is the first overall R & D project. In terms of new energy vehicle business, the company's car radiator entered the customer resource pool, obtained the qualifications of BAIC New Energy, Datang and other suppliers, and obtained the Ningde-era Volkswagen and Tesla, Inc. projects, as well as soft connections and sealed rubber fixed points. the water-cooled plate has participated in the project proofing. In terms of products, Kunshan Pindai has become a qualified supplier for Nokia, Huawei, Hewlett-Packard, Acer and other customers. The ultra-thin heat pipe can achieve 0.35mm 0.3mm. The fan assembly line has been completed and the ultra-thin fan has been mass produced; the expansion plate injection line has also been completed in April.

Fund-raising investment 5G communication devices industrialization project to step up construction, and further enhance the strength of 5G. On April 17, 2020, the company received the funds raised by the non-public offering of A shares on gem in 2019, with a total amount of 699999984.99 yuan, which is mainly used for the industrialization project of 5G communication devices. after the implementation of the project, it will mainly produce 5G radome, antenna vibrator and high-performance structural components for switches, routers and other communication equipment. It will mainly meet the construction requirements of relevant base station antennas and communication equipment in the commercial process of 5G, and expand the production capacity of communication equipment structural components to be applied to switches, servers, routers and other communication equipment, and better provide customers with overall solutions for electromagnetic shielding and heat conduction applications, will further improve and enhance the company's product structure and enhance the company's profitability.

Investment suggestion: we estimate that the company's revenue in 2020, 2021 and 2022 is 3.759 billion, 5.043 billion and 6.458 billion respectively, and the EPS is 1.39 yuan, respectively, and the corresponding PE is 41.2, 28.9 and 22.8x, respectively. The company's customer qualification certification in new areas related to electromagnetic shielding and thermal conductive materials is smooth, and the base station antenna business will usher in rapid development in the domestic 5G new infrastructure. We are optimistic about the company's development potential in the 5G communications, new energy and consumer electronics markets. maintain the company's "Buy-B" rating.

Risk hints: 5G construction is not as expected, 5G mobile phone sales are not as expected, antenna oscillator application is not as expected, BWT's promised performance is not as expected, and M & An integration is not as expected.