Driven by the surge in sales of semiconductor materials, infrared germanium and photovoltaic germanium, the company's net profit rose 184.2% in the first three quarters of 2020 compared with the same period last year, of which the net profit growth rate in the third quarter was as high as 219.9%. With the rapid growth of gallium arsenide / indium phosphide semiconductor sales, the superimposed germanium supply and demand pattern is expected to improve in the context of germanium prices are expected to continue to rebound, the company's performance has entered a period of rapid growth, maintaining the company's "buy" rating.
The performance is located in the first half of the forecast, and the Q3 performance in 2020 rose 219.9% from the same period last year. In the first three quarters of 2020, the company realized operating income of 499 million yuan, + 49.7% year-on-year; net profit of 9.05 million yuan, + 184.2%; and net cash flow of operating activities of 96 million yuan, an increase of 209.0% over the same period last year. Among them, Q3 realized operating income of 142 million yuan in a single quarter, + 37.46% of the same period last year, and net profit of 3.01 million yuan, + 219.9% of the same period last year. The reasons for the big increase in the performance in the first three quarters: 1) the sales of photovoltaic germanium / infrared germanium / semiconductor materials increased significantly, and the company's Q1-Q3 gross profit was 75 million yuan, an increase of 34.9% compared with the same period last year. 2) the company's Q1-Q3 management expenses were 38 million yuan, down 19.7% from the same period last year.
Germanium prices continued to rebound, infrared germanium and photovoltaic germanium sales increased greatly. In the first three quarters of 2020, the company's sales of material-grade / photovoltaic / infrared / fiber-grade germanium products were-3.84%, respectively, compared with the same period last year. Sales and gross profit margin increased significantly. As of October 26, the price of germanium has risen from a seven-year low of 6650 yuan / kg in mid-February to 7050 yuan / kg. Driven by 5G construction, germanium demand increases, germanium supply and demand pattern improves, germanium price rebound material will continue. With the rising price center and rising demand, the gross profit margin and sales of optical fiber germanium and material-grade germanium are expected to pick up.
Sales of semiconductor materials maintain rapid growth, which will be the main driving force driving the company's performance in the future. In the first three quarters of 2020, the company's sales of gallium arsenide + indium phosphide single crystals (equivalent to 4 inches) rose 131.3% from a year earlier, and the growth rate remained strong. We expect annual sales of 160000 tablets, a growth rate of more than 120%. The company now has a production capacity of 800000 gallium arsenide (equivalent to 4 inches) and 50,000 indium phosphide (equivalent to 2 inches). Benefiting from the independent control of the semiconductor industry chain and the growth of the gallium arsenide substrate industry driven by 5G mobile phones, we expect the company to sell 325,000 canister semiconductor materials in 2021pm 2022, corresponding to a CAGR of 108%, which is expected to become a major growth point in the future.
Risk factors: germanium prices fluctuate, sales of germanium products fall short of expectations, sales of gallium arsenide semiconductors fall short of expectations.
Investment suggestion: it is expected that the supply and demand pattern of germanium will improve, and the price of germanium is expected to hit bottom and rebound. Gallium arsenide semiconductors have sufficient production capacity, benefiting from autonomous control, and the output shows a trend of rapid growth. We maintain the forecast of the company's 2020-2022 net return profit of 0.37pm 105max, which corresponds to 0.06000,000 EPS for 2020-2022, respectively. Maintain the company's "buy" rating.