Event: the company released its third quarterly report for 2020 on October 29. According to the report, in the first three quarters of 2020, the company achieved operating income of 214 million yuan, down 7.15 percent from the same period last year, and net profit of 96 million yuan, down 9.14 percent from the same period last year. In the third quarter alone, the company realized operating income of 68 million yuan, down 25.57% from the same period last year, and realized net profit of 30 million yuan, down 27.79% from the same period last year.
Sino-US trade friction dragged down the company's performance, and the improvement in product structure helped drive gross profit margin to an all-time high.
The decline in the company's performance is mainly due to the impact of the trade war between China and the United States, and the electromagnetic shielding film orders of some mobile phone terminal customers have declined. Taking into account the large number of customers downstream of the company, we expect this impact to gradually weaken in the Q4 quarter, orders will gradually recover, month-on-month improvement.
In the first three quarters of 2020, the company's gross profit margin was 67.12%, down 1.26pct from the same period last year; in the third quarter, the gross profit margin was 71.99% higher than the same period last year and 6.30pct higher than the previous quarter; the gross profit margin reached an all-time high in the third quarter, mainly due to the increase in the proportion of USB3 products with high gross profit margin. In terms of expenses, the expense rate in the first three quarters was 25.63%, an increase of 6.66pct over the same period last year. Specifically, the company continued to increase R & D investment, with R & D expenditure of 33.69 million yuan in the first three quarters, an increase of 49.02% over the same period last year; financial expenses in the first three quarters were-2.15 million yuan, compared with-4.74 million yuan in the same period last year, mainly due to the increase in exchange losses.
Ultra-thin copper foil and ultra-thin flexible copper clad laminate open up the company's growth space. The company's two new products position high-end PCB/FPC upstream raw materials, in line with the downstream electronic products "short and light" development trend, the current market is dominated by Japanese manufacturers, high unit price, strong profitability. Benefiting from the accumulation of core technologies such as vacuum sputtering and electrolytic plating in the manufacturing process of electromagnetic shielding film, the new products have good performance and are expected to replace Japanese manufacturers by virtue of performance-to-price ratio. The ultra-thin copper foil project is expected to be gradually put into production in the Q4 quarter of this year, and the very thin flexible copper clad laminate project is expected to be gradually put into production in the Q1 quarter of next year.
Investment advice and valuation: we are optimistic about the company's leading position in electromagnetic shielding film and its business development in ultra-thin copper foil and ultra-thin flexible copper clad laminate. It is estimated that the company's 2020 EPS 2021 EPS in 2022 will be 1.71 shock 4.18 shock 6.71, and the current share price will be 51-21-13 times that of PE, maintaining a "buy" rating.
Risk hint: capacity release is less than expected and competition intensifies.