Event
On August 25, 2020, the company released its semi-annual report. In the first half of the year, the company achieved revenue of 1.89 billion yuan, a decrease of 8.83% over the same period last year, and a net profit of 126 million yuan, an increase of 30.28% over the same period last year. The reason for the decrease in operating income and the sharp increase in net profit in the first half of the year is mainly due to the active implementation of transformation and upgrading, strengthening lean management, reducing cost and increasing efficiency in the first half of the year. The company gradually increases technological innovation and research and development, deeply ploughing new low thermal resistance and ultra-high energy efficiency LED packaging, semiconductor lighting and display, intelligent control, artificial intelligence system and other technical fields, and focuses on promoting the innovative research and development of high temperature superconducting induction heating technology and semiconductor laser technology. The megawatt high temperature superconducting induction heating equipment and large mouth very high temperature superconducting magnet technology developed by the company are the world leaders and have entered the industrialization stage; Jiangxi Zhongjiu Optoelectronic Industry Research Institute, which focuses on the frontier scientific research in the optoelectronic field, has been officially approved. Zhongjiu Optoelectronics, a subsidiary, was selected into the special investment plan for the development of military-civilian integration industry.
Main points of investment:
Lean management to deal with the impact of the epidemic and other phased pressure: subsidiary Lianchuang is one of the domestic mobile phone core backlight product suppliers, affected by the terminal market, the current revenue of 590 million yuan, a year-on-year decline, but through continuous lean management, technology upgrading, product profit margins have improved.
Subsidiary Hualian Electronics has a revenue of 627 million yuan, which has declined from the same period last year due to international trade factors, but measures such as purchasing cost reduction and production efficiency improvement have achieved remarkable results, coupled with increased policy support, and net profit has increased compared with the same period last year. In terms of wire and cable business, the company made great efforts to reduce gross profit margin products, focusing on developing military products dominated by demagnetization cables, which significantly reduced losses, and successfully dealt with the impact of fierce competition in the communication cable market, low demand in the traditional RF cable and optical cable market, and the failure to meet the expected 5G promotion speed.
The development of military business has a long history: the company was formed by the merger of military factories 746 and 834 in Jiangxi region. it has a long-term cooperative relationship with the military and has a number of military assets. Jiangxi Lianchuang Special Microelectronics Co., Ltd. (former 746 factory), a wholly-owned subsidiary, has steadily increased orders for military products in recent years, and has successively undertaken the supporting tasks of major aerospace projects such as the national Shenzhou spacecraft, the long March rocket project, and Chang'e running to the moon. The associated company Northern Lianchuang Communication Co., Ltd. (former 834 factory) has realized the transformation from communication monomer switching equipment to sub-system and system as a whole, forming four major product directions, such as command and control communication, inspection and maintenance, simulation training and civil special network. gradually become the core supplier of weapons and equipment information overall design and system integration.
Acceleration of industrialization of high-power semiconductor lasers: medium-long laser and Jiangxi Zhongjiu Optoelectronic Industry Research Institute, which are jointly established with Nine Academies, focus on the research, development and production of high-power laser chips and lasers. Market applications include civil market, military equipment and scientific research fields, mainly engaged in semiconductor laser packaging, fiber coupling modules, laser manufacturing light source, laser display light source and other industrial projects. The target annual output value of the first phase of the project exceeds 1 billion yuan. According to the strategic plan, Zhongjiu Laser will undertake the production of laser special equipment in the future and contribute to the national defense cause of the Republic in the new era.
Profit forecast and investment suggestions: in 2020, 2021 and 2022, the company is expected to achieve operating income of 5.613 billion yuan, 7.367 billion yuan and 9.678 billion yuan respectively, and return to the mother net profit of 264 million yuan, 396 million yuan and 513 million yuan respectively, corresponding to the corresponding EPS of 0.60,0.83,1.16 yuan respectively, corresponding to the current closing price PE of 35.59X/25.22X/17.94X respectively, maintaining the "overweight" rating.
Risk factors: intensified economic and trade frictions between China and the United States, further intensified competition in traditional business areas, and less-than-expected progress in the industrialization of scientific research achievements.
