On July 4, 2024, the company announced a preliminary increase in the 2024 semi-annual results. The profit side of 24H1 showed a high year-on-year growth rate. On July 9, the company issued an indicative announcement on changes in shareholders' rights and proposed changes in the company's control. Local state-owned assets are expected to become actual controllers of the company and maintain the “increase in holdings” rating.
Key points to support ratings
The profit side of 1H24 Company grew significantly year on year, and there was also an upward trend from month to month. The company predicts that 24H1 will achieve net profit of 2.75 to 0.315 billion yuan, an increase of 40.34% to 60.75%. Net profit not attributable to mother was 2.7 to 0.31 billion yuan, an increase of 40.30% to 61.08%. Looking at a single quarter, the company expects to achieve net profit of 0.166-0.206 billion yuan in 24Q2, a median increase of 53.72%, a median increase of 70.64%, and a net profit of 1.62 to 0.202 billion yuan without return to mother. The median value also increased by 54.24%, and the median increase of 68.52%.
Multiple factors helped the company's 1H24 revenue and profit continue to improve. 1) Strong orders and increased production. In 24H1, the electronics industry as a whole picked up. The company closely followed market demand, actively developed business, and had sufficient orders. Coupled with the accelerated release of production capacity in convertible bond raising projects, the overall capacity utilization rate increased, driving performance growth. 2) Further optimization of the product structure. The company continues to promote the development of emerging businesses such as new energy vehicles, data centers, and wind and solar storage to achieve continuous optimization of the product structure, thereby increasing gross margin. 3) The decline in the exchange rate of RMB against the US dollar is favorable.
The company mainly does overseas business. The settlement currency is mostly the US dollar. The exchange rate of RMB 24H1 against the US dollar fell, generating exchange income.
Local state-owned assets enter the market to protect the company's long-term growth. On July 5, Xinhao International Group Co., Ltd., the controlling shareholder of the company, and She Yingjie, the actual controller, signed a “Share Transfer Agreement” with Guangdong Shunde Holding Group Co., Ltd., agreeing that Xinhao International will transfer 0.171 billion of the company's shares to Shunkong Group at a price of 20.20 yuan/share, accounting for 25.90% of the company's total share capital. After the transfer is completed, the controlling shareholder of the company will be changed to Shunkong Group, and the actual controller will be changed to the Shunde District State-owned Assets Administration Bureau. By introducing Shunkong Group as the controlling shareholder, the company can use the influence of state-owned capital to further explore the domestic market, optimize the customer structure, achieve good collaborative development in advantageous industries such as new energy vehicles, smart home appliances, and robot manufacturing, and open up new market growth space for the company. This change in controlling interest will help further enhance the company's profitability and core competitiveness. In addition, the PCB industry needs sufficient financial support. The entry of state-owned assets is conducive to optimizing the company's shareholder structure, enhancing the company's financial credit and financial strength, speeding up the company's industrial layout, improving the company's resilience to risks, developing collaboratively with shareholders' superior resources, and enhancing the company's overall profitability.
valuations
Considering that the AI and NEV boom continued to rise in 24, the company actively promoted cooperation with major international customers and was deeply involved in developing new products, but considering that the overall PCB environment is still showing a weak recovery trend, and competition on emerging tracks is becoming increasingly intense, we expect the company to achieve revenue of 5.423/6.263/6.955 billion yuan in 2024/2025/2026, respectively, and realized net profit of 0.605/0.722/0.845 billion yuan respectively, EPS was 0.92/1.10/ 1.28 yuan, corresponding to 2024-2026 PE is 25.9/21.7/18.6 times, respectively. Maintain an “Overweight” rating.
The main risks faced by ratings
The risk of changes in the relationship between supply and demand due to macroeconomic fluctuations, the risk of a sharp expansion of industry production capacity, the risk of falling product prices due to intense competition, and the risk of uncertain equity delivery.