Main points of investment:
Events. The company issued a forecast of results for the first three quarters of 2020, and the company expects to achieve a net profit of 1.98-278 million yuan in the third quarter of 2020, an increase of 24.10 percent over the same period last year. 74.24 percent of the net profit for the first three quarters of 2020 was 7.00-780 million yuan, an increase of 287.70 percent over the same period last year.
Optical imaging business drives growth. The main reasons for the company's good operating condition and year-on-year increase in net profit from January to September 2020 are: (1) the company's optical imaging business has maintained rapid growth, optical lens production capacity and shipments have continued to increase; (2) benefiting from the increase in orders from some major customers, the increase in tablet sales and the independent development of Android touch business, the touch business structure has been continuously optimized and profitability has been significantly improved. (3) the company continues to strengthen cost control and inventory management, and the overall operation is efficient and stable.
Set the increase code, expand production capacity, enrich the product line, and enhance the company's core competitiveness. In 2020, the company released additional issuance plans, including high-pixel optical lens construction project, 3D optical depth sensor construction project and high-pixel micro-camera module construction project. After the implementation of the above projects, the scale of the company's optoelectronic production line will be further expanded, the supply capacity of lens production capacity will be fully improved, promote the continuous expansion of the company's industrialization scale, and improve the company's overall profitability; by expanding the application of 3D sensing in face recognition, background virtual, 3D modeling, dynamic expression, gesture control, AR/VR and other fields, it is conducive to the stable and sustained growth of the company's performance. The R & D and volume production of high-end products such as high-pixel double photography and triple photography can continuously meet the needs of consumers and further increase the company's market share.
Vertical industrial integration in the optical field. In December 2017, the company established a subsidiary Nanchang Oufeiguang Precision Optical products Co., Ltd., which officially entered the optical lens industry; in October of the following year, the company acquired a 100% stake in Fuji Tianjin and its related lens patents, further improving the company's layout in the field of optical lenses. Since entering the lens industry in 2017, the production capacity of the company's mobile phone lenses has been expanding, and shipments have increased month by month. As of September 24, 2020, the production and sales rate of the company's mobile phone lenses has reached more than 95%, and the production capacity has basically reached full capacity.
Profit forecasts and investment advice. We estimate that the EPS of Ofeiguang from 2020 to 2022 is 0.60,0.75 and 0.99 yuan respectively. Combined with the valuation of comparable companies, Ofeiguang is given a valuation of 40-45 times PE in 2020, with a reasonable value range of 24.00-27.00 yuan and a rating of "better than the market".
Risk hint. The impact of global macro-economy on consumer electronics; the risk of slow commercialization of 5G; and the risk that the development of automotive smart / driving-assisted technology is not as expected.