Key points of investment
Domestic copper-clad board leaders are expected to recover their performance as the economy recovers the basic market. At the same time, we are actively expanding aluminum-plastic films and strategically placing CBF films to drive a breakthrough of 0→1 in China. New products are expected to continue to grow.
Deeply cultivate the copper-clad circuit, open up new territory and welcome new opportunities
The company is a leading supplier of copper-clad plate materials in China. Its main products include copper-clad plates, composites, aluminum-plastic films for lithium battery packs, etc., with a wide range of applications. We have established business relationships with more than 50% of the top 100 companies in the PCB industry. The main customers include Jingwang Electronics, Kexiang Electronics, Osconn, Shenghong Technology, etc. At the same time, it has a national enterprise technology center platform and a high-end R&D team to accelerate the pace of production capacity construction and vertical integration, and further implement the “H1 (mature product line) +H2 (growth product line) +H3 (seed product line)” three-level product management strategy. As production capacity, products, and customers continue to expand, performance is expected to continue to grow.
Core raw materials for carrier boards, domestic replacement can be expected in the future
1) The copper-clad plate market is growing steadily and developing towards high-end. At present, the global share of copper clad plate production in mainland China increased from 60.33% in 2013 to 73.32% in 2022. The market size is increasing year by year, reaching 71.2 billion yuan in 2022. 2) Both supply and demand in the aluminum-plastic film market are growing. According to SPIR statistics, China's domestic aluminum-plastic film market in 2020 was 4.1 billion yuan, and the market demand was 114 million square meters. It is estimated that 2025 will be about 8.9 billion yuan and 1.41 billion square meters. 3) As a key material for advanced packaging, the CBF laminated insulating film market has a market share of about 96% of Japanese companies. It is in an absolute monopoly position, and there is plenty of room for localization.
Actively develop new products and expand new fields of application
The company has significant advantages in product research and development, resource integration, market development, and intelligent manufacturing. 1) The 2022H1 fund-raising project has an annual output of 24 million high-grade copper clad sheets. The first phase of the Zhuhai Toyama manufacturing base project was put into operation, adding about 800,000 sheets per month to a production capacity of about 800,000 sheets of high-grade copper clad plates. 2) In July 2022, the company set up a joint venture with the Shenzhen Advanced Electronic Materials International Innovation Research Institute to develop laminated insulating films. 3) Actively promote the construction of a 36 million square meter production expansion project for aluminum-plastic film for lithium batteries. As of 2023H1, it is in the trial production stage.
Profit forecasting and valuation
We selected similar A-share listed companies Shengyi Technology and Tiancheng Technology as comparable companies. The estimated operating income of the company in 2023-2025 was 35.02/41.04/5.084 billion yuan, with a year-on-year growth rate of 6.59%/17.21%/23.86%; net profit of net income was -0.02/1.48/323 billion yuan. The current stock price corresponding to PE is -/32.62/14.94 times, and EPS is -0.01/1.04/2.27 yuan. Considering that the PCB industry will continue to grow in the future, the copper-clad board business is expected to maintain steady development; the aluminum-plastic film business benefits from the continuous improvement of the lithium battery industry, which will bring a considerable increase in the company's revenue; at the same time, as a leading CBF film company in China, the company is expected to take the lead in fully benefiting. Overall, for the first time, Huazheng New Materials was given an “increase in holdings” rating.
Risk warning
Downstream demand recovery falls short of expectations, risk of raw material price fluctuations, and risk of fund-raising projects falling short of expectations.