The construction of data centers has accelerated and the demand for PCB products in the medical sector has increased under the epidemic, and the revenue scale and profitability in the areas of data communications and medical PCB have been improved. Jiangsu Bomin production capacity was further released, achieving a profit of 29.12 million yuan, an increase of + 562.16% over the same period last year.

Guoxin Electronic Viewpoint:

1. Bomin Electronics has been ploughing the PCB industry for many years, and its technology and customer resources belong to the forefront of the industry. After solving the capacity bottleneck through refinancing, Bomin Electronics will give full play to its potential and enter the "fast lane" of performance growth, with remarkable results of strategic transformation, continuous optimization of product and customer structure, and continuous enhancement of profitability.

2. Actively lay out PCBA business, build solution business group, realize vertical integration of industrial chain, enhance customer stickiness, and deepen enterprise "moat".

3. As the core supplier of HDI and FPC in the domestic PCB industry, it has long benefited from the growth opportunities brought by the domestic alternative trend of new energy vehicles and 5G construction.

Comments:

Focusing on the PCB industry for many years and accumulating rich product technology and customer resources, Bomin Electronics was founded in 1994 and listed A shares for the first time in 2015. More than 20 years has been focused on the production and sales of high-end printed circuit board production and sales business. The company has six subsidiaries, including Shenzhen Bomin, Jiangsu Bomin, Bomin Technology (Hong Kong), Shenzhen Juntian Hengxun, Shenzhen Bosmin Technology, Shenzhen Dingtai Haohua Technology, and distributors in the United States, Britain, Germany, Brazil, Hong Kong and other countries and regions. According to the latest data of China printed Circuit Industry Association, the company ranks 49th among the top 50 PCB suppliers in the world.

The company always adheres to the competition strategy of differentiated products, and takes the development technology of the new generation of printed circuit board industry represented by HDI board, flexible circuit board, rigid-flexible composite board and aluminum substrate, high-frequency substrate and other special boards as the leading direction, forming leading products used in new energy vehicles, 5G communications, small spacing LED lights, camera modules, intelligent terminals, IOT modules and other six fields. With years of continuous R & D investment and technology accumulation, the company has mastered any order of HDI product production technology and has achieved mass production. In terms of high-order HDI technology, the company has achieved breakthroughs in the fabrication of high-end high-order HDI circuit boards, such as arbitrary layer interconnection, minimum line width / line distance of 50 μ m / 50 μ m, minimum blind hole 75 μ m, electroplating hole filling dimple less than 15 μ m, interlayer alignment deviation less than ±25 μ m, etc., and has been successfully applied to smart phones, Internet of things modules and other fields. In the field of new energy vehicles, the company proposed strong and weak electric integrated circuit board technology and applied for patents in 14 years, and signed a strategic cooperation agreement with BYD in 18 years to enter the new energy vehicle market. In addition, in the field of camera modules, the company began to focus on the application of flex plywood in this field in 2013, and has cooperated deeply with Ofeiguang, Shengtai and other high-quality customers to achieve mass supply of camera module products.

The effect of strategic transformation is remarkable. Continuous improvement in profitability

Jiangsu Bomin continued to lose money in 2015-2017 due to the slow expansion of production capacity due to the premature layout of HDI capacity and the substandard amount of IPO financing, which brought a great drag on the company's performance. Through business improvement measures such as upgrading the production line and continuously optimizing the customer structure, the company realized that Jiangsu Bomin ushered in a performance inflection point in 2019, achieved annual profit for the first time, and led to the continuous improvement of the company's gross profit margin and net profit margin. From the customer strategy, the company gradually clean up small and medium-sized customers, conquer the industry head customers, and achieve economies of scale so as to improve business efficiency. At present, the company maintains good cooperation with Samsung, BYD, Huaqin (Huawei, OPPO, Vivo mobile phone foundry), Xinwei Communications, Ofeiguang, Liad, iFLYTEK and other industry leading customers.

Focus on the application field of high-value products, build a differentiated competition strategy, and promote the gross profit margin of products to increase year by year. At first, the application field of PCB is mainly consumer electronics, industrial control and medical treatment. in recent years, it has continued to increase the R & D and market development of high value-added products such as communication networks, servers, automotive electronics and HDI, continuously optimizing the product structure, and significantly increasing the proportion of income from data / communications, automotive electronics and other fields. It has formed a hierarchical product application field layout based on consumer electronics, data / communication, automotive electronics, industrial control and medical treatment.

The company's operating efficiency continues to improve. The company's nearly three fees are well controlled, showing a continuous downward trend. In recent years, the company continues to invest in improving automation production capacity, capacity utilization rate gradually increased, while strengthening staff on-the-job training and daily fine operation capacity, to further improve the efficiency of operation and management. Among them, the proportion of management expenses in revenue dropped from 4.79% in 2015 to 3.73% in 2019, reaching the first echelon level of the industry. In terms of per capita output, the company's per capita income increased from 315000 yuan in 2015 to 709000 yuan in 2019, nearly doubling in five years, with a compound growth rate of 22.4%.

5G + new energy business two-wheel drive, performance is expected to enter the "fast lane" of growth

In 2019, the global PCB output value is about 61.3 billion US dollars, while China's PCB output value is about 33 billion US dollars. The global PCB industry will benefit from the continued growth of the electronics industry in the future. According to Prismark data, the global PCB market is expected to maintain a compound growth rate of 3.9% in the next three years, and the global PCB industry output value is expected to reach US $68.8 billion in 2023, of which 5G, Internet of things, automotive electronics, industrial 4.0, cloud servers, storage devices and so on will become new directions to drive PCB demand growth. The domestic PCB industry has gone through the stage of low-end production capacity expansion and is transforming to the direction of high-tech added value. Due to the gradual transfer of global PCB industry to China and the gradual decline of output value in the United States, Europe, Japan and other regions, China's global share of PCB output value continues to rise, and the growth rate of industrial scale is higher than the global average growth rate. With the peak of 5G construction in China and the further popularization of domestic new energy vehicles, domestic PCB manufacturers with core technology will usher in a huge market and opportunities.

The large-scale construction of 5G is expected to realize the explosive growth of PCB data communication market. Due to the higher 5G frequency band and smaller coverage of single station, the number of base stations and antennas needed for 5G construction will be much higher than that of 4G period. The Massive MIMO (large scale Antenna Technology) is based on the substantial increase in the number of base stations, and the number of antennas provided is greatly increased to improve the spectrum efficiency and reduce the delay, so the number of PCB per station is significantly higher than that of 4G.

At the same time, high value-added multi-layer high-frequency and high-speed PCB boards are needed in PCB products to meet the requirements of low dielectric constant and low dielectric loss. The PCB usage data and unit price of a single macro base station will be greatly improved.

The company has accumulated strong technology in the field of data communication. In 2016, the company launched the research and development of high-frequency high-speed boards in the 5G communications industry, and first mastered the production capacity of many kinds of printed boards, such as base station antenna power board, coupling calibration network version, optical module board and RF unit, which are suitable for 5G scenarios. The cumulative investment in R & D expenditure exceeds 35 million yuan. In 2019, the company's 5G base station PCB sales exceeded 100 million yuan, and delivered bulk 5G communications PCB orders from customers such as Tongyu, Mobi, 3D, Jingxin, Xinwei, Shenda Weitong, etc.

With the continuous improvement of the penetration of new energy vehicles and smart driving devices, the high-end PCB market will benefit deeply. The battery, motor and electronic control system of the three core modules of the new energy vehicle, as well as the millimeter wave radar needed for intelligent driving, all need to use a large number of PCB. Compared with ordinary PCB, PCB used in automotive electronics has higher hardness and heat resistance coefficient, and its production added value will be higher. In addition, because the frequency of millimeter wave radar circuit used by intelligent driving equipment is as high as 24 77GHz, there are high requirements for high frequency characteristics, dielectric characteristics and manufacturing accuracy of PCB board. The average unit price of PCB used is 3-10 times that of ordinary PCB. The above trends show that with the continuous popularization of new energy vehicles and automatic assumptions, the PCB market will usher in the opportunity of rising volume and price. The company started its layout early in the field of automotive electronics and accumulated deeply. In 2014, the company first launched and patented the strong and weak electricity integrated circuit board technology in the industry, successfully developed the high-power current copper-embedded circuit board engineering technology in 2017, and successfully cut into the supply chain of some automobile companies, focusing on the battery and electronic control system racetrack. Cooperative research and development with Ningde Times, BYD and other companies. At the same time, the company has signed strategic cooperation agreements with BYD, Guoneng and other customers and started to supply. In 2019, the company's auto PCB accounted for 23% of revenue.

PCBA business commitment to continue to exceed the completion of integration to strengthen the company's core competitiveness of the company in 2018 to complete the acquisition of Juntian Hengxun, the layout of the industrial chain vertical integration business. Juntian Hengxun is an integrated customized solution provider for PCBA core electronic components, mainly engaged in failure analysis, customized development and sales of PCBA-related core electronic components, and has formed a customized business model based on industry leading customers, with industry-leading customized solution development capabilities and business advantages to subdivide areas to serve leading customers. With the continuous shortening of the upgrading cycle of the consumer electronics industry, PCB downstream customers need PCB manufacturers to provide an integrated PCB board + components solution to reduce management and control costs. Through the acquisition of Juntian Hengxun, the company strengthens its layout in the PCBA field, grasps the development capability of corresponding electronic components, and provides customers with omni-directional, multi-link, one-stop products in coordination with its main business, which can further enhance customer stickiness and enhance its sustainable profitability. At the same time, Juntian Hengxun's own industry quality customers (Gree, Midea, Jiuyang, Ox, XIAOMI, etc.) can also bring further growth space for the company's PCB main business.

Fixed increase code rigid-flex bonding board and high-grade HDI board, improve production capacity to seize the new round of cycle dividend the company plans to raise 1.245 billion yuan by way of fixed increase to build "high-precision multi-layer rigid-flex combined printed circuit board industrialization project" and "high-end printed circuit board production technology transformation project". The company has a deep accumulation in technology research and customer resources, but the production capacity has been limited due to the lack of funds raised by IPO in the early stage, which does not give full play to the advantages of its product technology. The funds raised to expand production capacity will give full play to the company's technological advantages in new energy vehicles, 5G data communications and consumer electronics, help to obtain large-scale orders from leading customers in the industry, further improve operational efficiency and profitability, and enjoy the growth dividend under the trend of domestic substitution of PCB.

Investment advice:

After the successful strategic transformation and further improvement of production capacity, the company will give full play to the advantages of technology and customer resources in the industry. We are optimistic that the company will continue to benefit from the rapid growth opportunities under the trend of 5G construction, the popularity of new energy vehicles and domestic alternatives. It is estimated that the 20-22 net profit will be 2.7 million yuan, 3.2 million yuan, and 0.91 yuan, corresponding to EPS 0.62, 0.72 and 17.1X, respectively. The previous share price PE will be 25.0, 21.6 and 17.1 X, maintaining the "buy" rating.

Risk Tips:

The delay of refinancing led to the delay of the release of production capacity, the slower-than-expected growth of the domestic new energy vehicle market, and the expansion of new customers in various fields.