Dingtai Hi-Tech: Global leader in PCB drills, multi-track layout opens the growth ceiling

Guangdong Dingtai Hi-Tech Technology Co., Ltd. was founded in 2013 and is located in Houjie Town, Dongguan City, Guangdong Province. Its business scope ranges from PCB drills, cutters, brush wheels, automation equipment, industrial film products to CNC tools, surface coatings, etc., and its products are widely used in PCB, 3C, automotive parts, molds and other industries. It has been rated as an “Excellent National Brand Enterprise” by the China Electronic Circuit Industry Association for many years in a row.

In 2020, PCB drill sales ranked first in the world, with a global market share of 19%, making it a leading global supplier in the field of micro drilling in the circuit board industry. In terms of technology research, we have always adhered to the concept of “industry, education and research”, adhering to the principles of enterprise as the main body, R&D as the core, and market-oriented. We have not only maintained long-term cooperation with universities, but also established strategic R&D relationships with many well-known enterprises in the industry.

Main PCB drill business: Driven by digital informatization, actively adapt to the transformation of the AI server industry

Top-level designs such as the “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” issued by the State Council all use the electronic information industry as a key development area.

Policy support will help promote the continuous improvement of PCB technology, the continuous expansion of application fields, and the continuous growth of the market size, which in turn will promote the company's future business development. Since its establishment, the company has been focusing on the micro tool segment for PCBs. Technicians have thoroughly studied all processing aspects of drills and cutters, continuously explored the production process, combined with research and development of new industry technologies and products, and accumulated rich industry experience and technical reserves, providing customers with full guarantees for providing customers with high-quality products. At the same time, the company developed various coating technologies such as CVD coating, PVD hard coating, and Ta-C lubricating coating to improve the usability of tools, meet the different tool coating needs of customers, and successfully achieve large-scale mass production of coating processing through self-developed coating equipment, forming a differentiated competitive advantage. The company's equipment for producing and testing tool products is mainly self-developed, and has basically been replaced by imports.

Through self-developed equipment, problems such as high cost and long cycle times of imported equipment are solved, which can not only effectively improve market response efficiency and production expansion flexibility, but also further reduce product processing costs and improve production efficiency and yield.

CNC tool and cutter business: Develop high-end advantages, improve quality and efficiency to open up room for growth. The size of China's CNC machine tool market will grow steadily and rapidly in the future, reaching 572.8 billion yuan by 2024. The increase in the size of the CNC machine tool market will drive consumer demand for CNC tools, which are consumable parts of CNC machine tools. While stabilizing mature products such as drills, cutters, and abrasives in the PCB field, the company improves and strengthens extended fields such as CNC tools, film materials, and CNC intelligent equipment, and actively develops new products adapted to the development prospects of the industry, gradually enriches product types, provides customers with overall solutions, and is committed to becoming a leading provider of key tools, materials, equipment and solutions for global industrial manufacturing.

Functional film materials business: continue to step up development to create a second growth curve

Functional films are diverse and can be used in many fields such as electronics, optoelectronic displays, industrial control, new energy, aerospace, etc., and have become one of the indispensable materials in the industrial field. While deepening its business in the PCB field, the company continues to expand emerging industries. In the functional film materials market, the company has successfully seized market opportunities and achieved rapid growth in performance with accurate market insight and rapid response capabilities.

Profit forecasting and valuation model: For the first time, we give a “buy” rating. We expect Dingtai Hi-Tech to achieve net profit of 0.288, 0.399, and 0.508 billion yuan respectively in 2024-2026. Considering that Dingtai Hi-Tech is the leader in the PCB drill segment, and the high-end CNC tools, functional film and other businesses continue to develop new growth curves, the company's growth rate is strong. We used the PEG valuation method, which is 1.20 times PEG in 2024. We gave Dingtai Hi-Tech 1.1 times PEG in 2024, corresponding to 35.56 times PE, corresponding to a target market value of 10.24 billion yuan, and a target price of 24.96 yuan/share. For the first time, coverage was given a “buy” rating.

Risk warning: market competition risk, raw material price fluctuation and supply risk, technology substitution risk, capital raising investment project implementation risk, estimation of subjective risk.