I. Overview of events

On August 27, the company announced that 20H1's operating income was 1.4 billion yuan, + 53% compared with the same period last year, and + 11% compared with the same period last year. It returned to its mother with a net profit of 40 million yuan and lost 30 million yuan last year.

II. Analysis and judgment

Q2's performance has increased significantly, benefiting from the increase in the share of mobile phone components and the increase in PC sales of major domestic customers:

Q2 achieved 900 million yuan in operating income, + 107% year-on-year, + 94% month-on-month, 20 million yuan net profit, + 151% year-on-year, and + 57% month-on-month profit, mainly due to: 1) the company returned to work quickly and the market share of mobile phone components increased; 2) shipments from major domestic PC customers maintained high growth. Subsidiary Corson Optoelectronics dragged down the company 25 million yuan in the first half of the year and 5 million yuan in the same period last year, excluding the panel business. At present, the panel business has a monthly profit and loss balance, and the boom in the second half of the year is expected to reduce losses.

Major customers in various fields at home and abroad are at full power.

1. Apple Inc: it has become the core supplier of iPhone medium frame, aluminum medium plate and pencil metal parts, and extends to Macbook and iPad products. This year, it begins to mass produce new iMac metal shell, and many categories of major customers bloom in an all-round way.

2. Domestic leading mobile phone customers: cut into the notebook supply chain and become the main supplier of metal shell; key customers will develop smart screen business with greater incremental flexibility; in addition, actively cooperate with the research and development of flexible screen hinge products.

Change of management, equity incentive shows the confidence of the company's growth.

The company's equity incentive requires that the 20-22-year net profit is not less than 100 million yuan in 2-3-4, or the income is not less than 30-40-50 billion yuan, which shows the company's confidence in future growth. The company's new general manager in 19 years in place, from the international first-line metal parts company Herbie, the new team is expected to bring a new look to the company.

III. Investment suggestions

It is estimated that the company's 20-22 operating income will be 100 million yuan in 32-41-51, and the estimated return net profit will be 1.9 billion yuan, corresponding to the valuation of 36-23-17. With reference to the latest TTM valuation of 59 times of SW Electronics on 2020-08-27, we believe that the company is undervalued and maintains a "recommended" rating.

Fourth, risk tips:

The risk of market competition, the risk of new product research and development, and the risk that the company's performance fluctuates with the upgrading of downstream products.