Sinopec Technology: A global leader in synthetic graphite. The company is committed to improving the reliability of electronic equipment using self-developed heat-conducting/conductive polymer technology and power filter technology. The main products include thermal interface materials, EMI shielding materials, artificial synthetic graphite, heat pipe/heat balancing boards, thermal modules, which are widely used in smart phones, communication equipment, consumer electronics, smart homes, automotive electronics, power electronics, medical equipment, high-end equipment manufacturing, etc. In the first three quarters of 2020, the company achieved operating income of 768 million yuan, an increase of 52.44% over the previous year; it achieved net profit of 135 million yuan to the mother, an increase of 77.34% over the previous year.
Consolidate the global leadership position of synthetic graphite, and the future prospects of heat pipe/heat balancing plates are promising. Synthetic graphite materials are mainly used in the field of consumer electronics to solve the heat dissipation problems of electronic products such as smartphones, tablets, and consumer electronics. Apple is the company's main customer for synthetic graphite materials. In 2019, the company further stabilized and developed major mobile phone customers in North America, and deepened cooperation with major domestic mobile phone manufacturers such as Huawei and VIVO. At the same time, the phased layout of the Korean market was completed, establishing and consolidating the company's global leadership position in the field of synthetic graphite. At the same time, the company completed the construction of a production capacity of 2 million ultra-thin heat pipes for mobile phones in the first half of the year, and batch supply has already begun; the second-generation automated production line for uniform heating plates (VC) was completed, creating a production capacity of 2 million tubes per month.
It is proposed to increase capital to a wholly-owned subsidiary and establish a Thai subsidiary to build new overseas production capacity. The company announced on November 26, 2020, that it plans to increase capital by 113.658 million US dollars to Mojin Development, a wholly-owned subsidiary in Hong Kong, and 114,000 US dollars to the US subsidiary Sinopec for the development of Mojin, the US Sinopec and the company to jointly establish a new Sinopec Technology (Thailand) in Thailand, and for the subsidiary to invest in overseas capacity construction projects around the company's main business in Thailand. This capital increase is used to set up a new overseas production capacity overseas, expand the overseas business layout, and enhance the company's comprehensive strength, thereby promoting the smooth development of overseas business, which is in line with the company's overseas market development strategy.
On February 25, 2020, the company announced a non-public offering of 29.07 million shares, raising no more than 831 million yuan. The funds raised will be used for the “5G Efficient Cooling Module Construction Project” and the “Supplemental Liquidity Project”.
The “5G High Efficiency Cooling Module Construction Project” plans to develop and produce 5G high efficiency cooling module products through the construction of a production base and the purchase of industry-leading production and testing equipment. The 5G high-efficiency cooling modules produced are mainly used in 5G smartphones, servers, 5G base stations and notebook computers.
After the project is delivered, the company's product structure will be further improved. At the same time, the company's existing customer resources can be combined to meet the diverse product needs of customers, thereby further consolidating and enhancing the company's position in the industry.
Profit forecasts. We expect the company's EPS in 2020-22 to be 0.67 yuan, 0.86 yuan, and 1.07 yuan respectively.
We gave the company 32-35 times PE in 2021, and the corresponding reasonable value range was 27.52-30.10 yuan. For the first time, we covered a “better than the market” rating.
Risk warning. Risk of fluctuations in raw material prices, macroeconomic growth falling short of expectations
