Main points of investment
Event: according to the company's quarterly report for 20 years, the company achieved an operating income of 768 million yuan in the first three quarters of 2020, with a net profit of 135 million yuan, an increase of 77.3% over the same period last year, deducting 129 million yuan in non-return net profit, an increase of 79.7% over the same period last year. Q3 is expected to realize a net profit of 71.97 million yuan, up 48 per cent from the same period last year.
Full orders drive rapid growth, and strengthen cost control to deal with the pressure of gross profit margin. Benefiting from the introduction of new projects and new products from major customers at home and abroad, as well as the continuous improvement of the supply share of overseas customers such as North American customers, the company's major products have sufficient orders and strong demand. the main business income, sales scale and sustained profitability continue to grow steadily, and the company's business performance has further improved steadily. Due to the impact of the pace of the volume of new products, the company's gross profit margin has declined, to 34% in the first three quarters of 20 years, and the Q3 is 33.9%, which is down 1.14pct and 4.3pct respectively compared with the same period last year. In terms of expenses, the company has strengthened its control. In the first three quarters, the R & D / management / sales / financial expense rates were 4.99%, 5.92%, 2.27%, 0.05%, respectively, with a total decrease of 3.5pct. Against this backdrop, the company's net interest rate rose to 17.5% in the first three quarters, maintaining a high level. Thanks to the growth of the company's revenue and rebates, the company's net operating cash flow was 90.27 million, an increase of 203.73% over the same period last year.
The forward-looking layout of heat conduction will make a breakthrough and consolidate the growth power of 5G. The company leads the industry in winding technology and is the main supplier of graphite heat sink for Apple Inc's mobile phone. In 2019, it successfully entered the supply chain of Huawei, vivo and other major domestic mobile phone manufacturers. Heat dissipation and shielding materials are widely used downstream, and there is a broad space for growth in the field of 5G Universal Intelligence Alliance and new energy vehicles. In order to meet the heat dissipation upgrade needs of 5G mobile phones and the high power heat dissipation needs of 5G base stations, the company has completed the preliminary technical and production preparation for the domestic 5G base stations and supporting equipment services, and has begun batch delivery. in the first half of the year, the production capacity of 2 million ultra-thin heat pipes of mobile phones has been completed, and the batch supply has been started, and the second generation automatic production line of VC has been completed. It has formed a production capacity of 2 million units per month. In June, the company raised 831 million yuan through a non-public offering to invest in the construction of a 5G efficient heat dissipation module project. it is expected that after the fixed increase project reaches production by the end of 2022, the industry position is expected to be further consolidated.
Investment suggestion: considering the breakthrough of the company's 5G product research and development / the completion of domestic major customer supply qualification certification, we believe that the company will be driven by new products in new areas and increased customer share. It is estimated that the company's 2020-2022 net return profit will be 1.85 and 2.52pm, with an increase of 50.8%, 36.2% and 40.3%, corresponding to the current PE44.4/32.6/23.2X. Maintain the company's "buy-B" investment rating.
Risk tips: the replacement volume of 5G mobile phones is not as expected, which affects the development progress of the whole industry; the price of 5G mobile phone cooling scheme is greatly reduced; the industry competition aggravates the risk that the company's share is less than expected; acquisition and integration is not as expected, and 5G new product research and development is not as expected.