Bomin Electronics is a leading HDI board manufacturer in China. The company is mainly engaged in the R & D, production and sales of high-precision printed circuit boards, the main products are high-density interconnection HDI, high-frequency high-speed boards, rigid-flex circuit boards and other special specification boards (including metal substrates, thick copper plates, super-long boards, etc.). Downstream applications have changed from consumer electronics, industrial control and medical care to consumer electronics, data / communication equipment, and automotive electronics accounting for 89% of revenue. The company attaches importance to technological innovation and process research and development. Since 2005, the company has carried out continuous research and development of HDI board process and invested in the construction of HDI board production line. At present, HDI accounts for more than 50% of revenue and is one of the leading HDI board manufacturers in China.
HDI board market space is large, 5G consumer electronics, communications, automotive electronics drive demand growth. According to Prismark, including packaging substrates, HDI accounts for about 15% of PCB. The market size of PCB is expected to reach US $77.7 billion in 2024, and the market size of HDI will reach US $11.7 billion. The demand trend of higher integration, lighter and less space in the mobile terminal promotes the upgrading of the motherboard HDI in the mobile phone; 5G base station construction brings a wave of new infrastructure tide, when the number of base stations is greater than 4G, the demand for PCB increases; new energy vehicles bring PCB volume and price rise, vehicle PCB demand is mainly concentrated in multi-layer boards, FPC and HDI boards.
New entrants have capital and technical barriers, the supply side remains unchanged, and the increase in demand leads to the shortage of supply and demand for HDI. 1) HDI has been dominated by overseas for a long time, and the progress of production expansion is slow: according to estimates, the global HDI output value in 2018 is US $9.1 billion, of which non-domestic manufacturers account for nearly 57%. However, due to the partial withdrawal of these manufacturers from HDI production, the new capacity is limited and the supply-side change is limited.
2) the entry cost of new manufacturers is high, and the capital and technical barriers are high: PCB manufacturers attach great importance to assets, and HDI production lines need to purchase equipment and other large amounts of capital investment. In addition, HDI technology is much higher than ordinary PCB, and it takes time and experience to accumulate. Therefore, for domestic manufacturers, capital and technology are high barriers to entry into the HDI field.
3) hierarchical upgrading consumes more capacity, and existing capacity is actually reduced: for the production capacity of low-level and low-level HDI, if high-level multi-layer HDI is to be produced, the final output will be greatly reduced.
The company adheres to the competitive strategy of differentiated products and expands the business of high-end products. After IPO raised funds to successfully turn HDI technology into profit, Bomin announced at the end of April 2020 that it intends to raise funds for non-public offerings to build the production capacity of precision multi-layer rigid-flex PCB products and further expand the capacity of other high-end products. With the help of the existing well-known high-quality customer platforms at home and abroad, the improvement of the company's high-end product structure will bring new revenue space for the company. In addition, the company acquired Jun Tian Hengxun in 2018, mainly engaged in customized solutions for PCBA electronic devices, and completed its performance commitments in 2018 and 2019, achieving net profits of 98.5 million yuan and 115 million yuan respectively. Through the acquisition of high-quality enterprises in the industrial chain and integrated layout, the competitiveness of the company will be enhanced.
Profit forecast and investment advice: the renewal and iteration of the whole electronic industry chain driven by the 5G era, we believe that the future upgrading of consumer electronics, communications, data centers and electric / intelligent vehicles will bring a large number of demand for high-end PCB products such as HDI. Bomin Electronics, as a veteran player in the PCB industry for many years, will deeply benefit from the dividend of the iteration of scientific and technological updates in the 5G era. Therefore, we expect that the company's revenue in 2020Universe 2021 will reach RMB 2.838 billion respectively, and the corresponding net profit to the parent will be RMB 2.49 trillion, respectively. The corresponding PE will be 26.0x/18.7x/13.9x, covering for the first time, and the company will be given a "buy" rating.
Risk hint: downstream demand is not as expected, product development is not as expected.
