Event: the company released its mid-term report for 2020, with operating income of 1.36 billion yuan in the first half of the year, an increase of 52.5% over the same period last year, a gross profit of 21.8%, a decrease of 1.8% over the same period last year, and a net profit of 36.037 million yuan per share, compared with a loss of 30.142 million yuan in the same period last year. In the second quarter, the company realized operating income of 900 million yuan, an increase of 107.3% over the same period last year, and a gross profit margin of 19.2%, an increase of 3.2% over the same period last year. The net profit belonging to shareholders of the listed company was 22.071 million yuan, which reversed losses over the same period last year.
Revenue in the second quarter reached an all-time high, and the adjustment of the consumer electronics structure increased significantly: despite the decline in mobile phone sales in the first half of the year, the company actively seized the opportunity, with revenue growing by 52.5% compared with the same period last year, of which Q2 reached a record high in the single quarter, up 107.3% from a year earlier to 900 million yuan. The growth in the first half of the year mainly came from the consumer electronics sector, with sales of major customers iPhone11 and SE2 exceeding expectations, chasing orders for low-cost models in the first half of the year, tablet computers' demand for home-based work and learning increased significantly due to the epidemic, and domestic customers in the notebook business began to bring better increments since October 2019. The risk of the company's original reliance on a single major customer has declined, the proportion of domestic customers has increased, and the structure of mobile phones, tablets and laptops is balanced to avoid a large-scale impact on revenue caused by the decline in the mobile phone market. Sales of e-cigarettes and medical device components remain relatively stable.
Gross profit margin still has room to improve, fee control to ensure profit margin: the company's first-half gross profit margin fell 1.8 percentage points year-on-year, revenue growth at the same time market competition is still strong, gross profit margin still has room for improvement. Therefore, expense rate control has become the core element of profitability. In the first half of the year, "four fees" accounted for 18.6% of revenue, down 10.5 percentage points from the same period last year. Sales expenses, management expenses, R & D expenses and financial expenses rates decreased by 0.8%, 4.1%, 3.5% and 2.1% respectively compared with the same period last year, reflecting the company's good operating efficiency.
In the first half of the year, the net profit was reversed, but the continued loss of the panel project still affected part of the company's profits, and the loss is expected to be reversed soon with the improvement of the prosperity of the panel industry in the future.
The second half of the year ushered in a major customer new product preparation cycle, multiple layouts and rich performance growth points: the company did not disclose its performance expectations for the first three quarters of 2020. In the short term, the demand for smartphones gradually recovered in the second half of the year with the new 5G cycle and the peak season of the industry. the company's major customers are optimistic about annual shipments, and 5G new products enter the stock cycle to bring increments. The introduction of domestic customers at the PC end continues to bring increments. Due to the limited development of PC business, the company has entered the supply of new products this autumn, and shipments are expected to grow rapidly in the future, and e-cigarette business will also enter the growth channel in the second half of the year.
Therefore, the company's revenue continues to be in the growth channel in the second half of the year. From the profit point of view, on the one hand, revenue growth and fee control stability brings profit improvement, on the other hand, the loss area of panel projects has gradually narrowed, Q3 is expected to turn losses into profits, and the improvement of profitability in the second half of the year will be better than that in the first half of the year. In the long run, the company takes precision structural parts manufacturing as the core, and multi-field layout to create performance growth points. at present, it has been extended to e-cigarettes, medical devices, cars, panels and other fields, forming a "brand effect" at the manufacturing end and reducing business risks. The company's proposed non-public offering to raise no more than 1.6 billion yuan for new capacity expansion has been approved, and will increase the size of wearable, medical and other fields in the future. We believe that the company has passed the low point of performance, the recovery channel has been opened, and the future growth is worth looking forward to.
Investment suggestion: our company forecasts earnings per share of 0.29, 0.49 and 0.58 yuan respectively from 2020 to 2022. The return on equity is 7.9%, 11.7% and 12.2% respectively, maintaining the buy-B recommendation.
Risk tips: the end product shipments of core customers are lower than expected; the shipments of e-cigarettes and other new products are not as expected; the construction and climbing of new capacity are not as expected; and the continued spread of the epidemic affects consumer electronics terminal demand.