Investment suggestion
In July 2020, the company announced that the employee stock ownership plan had completed the transfer of 6.42% of the shares (of which the management subscribed for about 50%). The company's second-quarter earnings were significantly improved compared with the same period last year and month-on-month, and announced a strategic upgrade to the pan-semiconductor field. We believe that the company's profitability is expected to improve significantly from 2021, upgrading its rating to "outperform industry". The reasons are as follows:
The employee stock ownership platform was transferred to 6.42% of the company, and the management subscribed for about 50%. In March 2020, the company launched an employee stock ownership plan (with a duration of 3 years), with a total capital of no more than 400 million yuan and no more than 1700 participants, including 13 Dong Jiangao and the chairman of the trade union, and the proposed subscription share is capped at 50%. On March 25, the company signed an equity transfer agreement with the second largest shareholder, Chengshang Technology, to transfer 35.29 million shares (6.4% of the total share capital at that time) to the employee stock ownership plan. The transfer price was 90% of the previous day's closing price (about 6.80 yuan per share). The total subscription amount is 240 million yuan.
Upgrading to the pan-semiconductor field strategy, new products are expected to increase in volume. At present, Hainer Semiconductor is in a leading position in the field of small and medium-sized silicon wafers, with a market share of about 60% and 70%. In the future, the company will launch medium-sized silicon wafers and other high-end products.
1H20 Heiner Semiconductor sales orders / gross profit / net profit increased 57% to 1.23% to 0.33 billion yuan. 1H20's gross profit margin on monocrystalline silicon and its products increased by 6.6ppt to 32.7% compared with the same period last year. With the gradual expansion of new products such as heavily mixed single crystals, the company expects 2H20 new sales orders to increase significantly. The company estimates that the annual revenue of Hainer Semiconductor is expected to reach 1 billion yuan within 3 years.
Profitability improved significantly in the second quarter. 2Q20 achieved an income of 895 million yuan, a year-on-year increase of 67.7%, a rise of 162.3%, and a net profit of 74 million yuan, an increase of 413.0% and 148.7%, and a record high of net profit in a single quarter.
2Q20's comprehensive gross profit margin is 29.6%, year-on-year / month-on-month increase of 1.5% / month-on-month increase of 1.5% / month-on-month increase of net profit margin of 8.3% on-year / month-on-month increase in 5.6/53.1ppt.
Transfer the environmental protection business in stages. The company integrates Suzhou Kehuan, Zhejiang Haituo and Dakang Environment into the newly established platform company, and transfers no more than 90% of its shares to Shanghai Shenneng in stages, of which the annual transfer in 2019-20-21 is 40%, 30% / not more than 20% respectively.
What is the biggest difference between us and the market? We believe that the bottoming of corporate profits in 2020 is a short-term phenomenon, and corporate profitability is expected to improve gradually from 2021.
Potential catalyst: the bidding of signal system market is accelerated; the volume of new semiconductor products exceeds expectations.
Profit forecast and valuation
As the water treatment business has not yet been released, we keep our profit forecast unchanged. The current share price corresponds to 2020 Universe 21 / 92 / 21 / 21 / 92 / 21 / P / E. The company's earnings are still bottoming out in 2020, and we expect a significant improvement from 21 years, so based on the 25 times Phampy E in 21, we raised our target price by 40% to 10.07 yuan, with 21% upside space, and upgraded our rating to "outperform industry".
Risk.
Downstream bidding is not as expected; the volume of semiconductor products is not as expected.