What happened: the company announced its first quarterly report and predicted that Q1 realized revenue of 60 million yuan, down 27.57% from the same period last year, and its net profit was 8.839 million yuan, down 29.48% from the same period last year. It is predicted that the net profit of Q1 will increase by 10-30% in the first half of 2020 compared with the same period last year. Q2 is expected to grow by 40-60% in a single quarter.
Comments:
1. Affected by the epidemic, delivery delays led to a decline in Q1, and batch delivery of 5G new products began to accelerate growth in the second quarter.
In the first quarter, affected by COVID-19 's epidemic situation, the time for the company and the upstream and downstream units of the industry to resume work and production was delayed, resulting in delays in the delivery of the company's products during the reporting period, and a decline in shipments of the company's main products compared with the same period last year. As a result, the company's operating income has declined compared with the same period last year. In addition, the continuous increase in investment in products such as plastic metallized devices and radiators for 5G communications has led to an increase in related costs.
Looking forward to the second quarter, 5G communication plastic metallized devices and radiators and other products already have batch production capacity. With the completion of bidding for 5G base stations of the three major operators and entering the delivery period one after another, it is expected that the second quarter will enter the stage of accelerated delivery. The company's rapid growth inflection point may have reached.
2. Speed up the merger and acquisition of Dongchuang Precision and speed up the progress of integration. According to the company's announcement on April 23, in order to speed up the integration of Dongchuang's precision business, rapidly expand the company's 5G business segment and replace it with a cash acquisition of 30% of Dongchuang's equity. At the same time, after the completion of this transaction, the company will have the right to acquire the remaining 70% of Dongchuang by issuing shares and / or paying cash in the future.
3. Continue to increase the layout of new products of 5G base stations. In terms of 5G new products, in addition to new products such as plastic metallized structures and radiators for base stations that have been delivered one after another, according to the company announcement, the company acquired a 51% stake in Shenzhen Xinwen Communication Technology Co., Ltd. actively layout 5G communication isolators, loops and other new fields. At present, Xinwen Communication's 5G communication isolators, circulators and other products have passed the R & D and proofing certification of major communication equipment manufacturers, and are expected to start product delivery in the second half of 2020, and new products such as 5G base station structures are expected to continue to expand.
Profit forecast and investment advice: the company's traditional main products are waterproof and sealing materials for communication base stations, which has developed into a leader in this field over the years, and has gradually extended its fireproof insulation products in electric power and other fields in recent years. By extending new application fields, the company's traditional main business is expected to maintain stable development.
In the face of the new opportunities brought about by 5G, the company gives full play to the advantages of customer resources of communications equipment vendors, and aims at the new changes and new requirements of 5G base station equipment, through the "endogenous + epitaxial" double-wheel drive layout of 5G base station structures, it is expected that as the three major operators'5G base stations enter the delivery period one after another, the company will begin to accelerate its growth in the second quarter. It is predicted that the company's net profit for 20-21 years will be 0.84 yuan and 162 million yuan, maintaining the buy rating.
Risk hint: the risk that the merger and acquisition of Dongchuang Precision falls short of expectations; the promotion of new products such as radiators does not meet expectations; and the promotion of 5G industry falls short of expectations.