occurrences
The company announced results for the first half year of 2020, achieving revenue of 5.090 billion yuan, +31.9% year on year; net profit of Guimu was 66 million yuan, +65.0% year on year; net profit of non-return mother was 39 million yuan, +126.1% year on year.
Key points of investment:
Optoelectronics and optical fiber saw a sharp increase. The main profit came from its subsidiary Yuanyijin: in the company's four major business segments, with the exception of the medical sector affected by the epidemic and the dental industry being suspended, sales of 12-inch target products in the optoelectronics sector were +228% year on year, and magnetic powder sales in the magnetic sector were +37% year on year. Among them, high-performance magnetic powder +17%, high-abundance magnetic powder +64.8%, and sales of germanium in the optical fiber sector remained flat, with sales of 5 tons of germanium in the optical fiber sector flat. Arsenic gallization revenue was +66% year on year, and infrared product revenue was +28% year on year +31.9%; gross margin and expense ratio are stable overall; in terms of profit contribution, subsidiaries have Products such as Yanjin's high-purity metal targets, evaporation materials, precious metal alloys and compounds amounted to 61 million yuan, exceeding the level for the full year of '19, and 12 million yuan for Yankuo Jinghuishi's infrared optical materials, etc., close to the level for the full year of '19.
Wafer production capacity releases superimposed import substitution, and target materials are expected to remain high: demand for downstream wafers is rising. Currently, 10 mainstream domestic 12-inch wafers are mass-produced, with a production capacity of 569,000 pieces/month, 9 are under construction, with a production capacity of 540,000 pieces/month. 42% of the 62 semiconductor fabs that were put into operation globally in 1720 are located in China; ultra-high purity metal sputtering targets are the core key material in integrated circuit production. The technology gap between domestic target companies and international peers is gradually narrowing, and the market competitiveness of imported replacement technology is increasing..
The magnetic, optical, and medical sector is expected to be stable overall: medium and heavy rare earths are exclusively supplied by China, and supply has been tightened over a long period of time; infrared optics is driven by military and civilian dual-use, and demand for optical fiber materials is improving with 5G commercialization; and the dental equipment industry is developing rapidly as health awareness increases.
The company's target material business is leading domestically and is expected to enjoy a surge in the industry: the company's target material industry has successfully broken through key customers, covering many high-end customers such as SMIC, Dalian Intel, GF, TSMC, UMC, and Beifang Huachuang. It has successfully transformed from the original 4-6-inch products to 12-inch products. A variety of 12-inch products have been verified in high-end customer markets and mass sales have been achieved.
Profit forecast and investment suggestions: Considering the high increase in domestic substitution in the optoelectronics sector and the stability of other sectors, the company's net profit for 20-22 is expected to be 1.3, 14, and 160 million yuan, and EPS of 0.16, 0.17, and 0.18 yuan, maintaining the “increase in holdings” rating.
Risk factors: Downstream demand fell short of expectations, and profitability declined further.
