Event: on April 9, the company issued a forecast for the first quarter of 2021. The company expects the net profit of shareholders belonging to listed companies to be 163 million yuan to 203 million yuan in the first quarter of 2020, an increase of 100% to 150% over the same period last year. According to the median forecast, 21Q1's net profit was 183 million yuan, an increase of 125% over the same period last year, continuing the rapid growth since 20Q3.

The first phase of Peyton in Hefei is progressing smoothly, and it is expected that 21Q4 will form effective production capacity: the company previously announced that it will jointly invest 10 billion yuan in integrated circuit advanced closed testing and module manufacturing projects with local governments. Of which the first phase of the project investment of 3.067 billion yuan, the company has announced plans to raise 1.71 billion yuan through a non-public offering, with the National Integrated Circuit Fund Phase II, Hefei through venture capital and other joint investment completed, including the new monthly average capacity of 48 million DRAM memory chips packaging and testing project, the average monthly capacity of 2.46 million storage module projects and monthly average production capacity of 3.2 million NAND Flash memory chips project. According to the announcement, the construction of the Peitun project in Hefei is progressing smoothly, and the first phase of the plant will be completed in the fourth quarter of this year and put into production in December to form an effective production capacity, which can fully match the latest business development progress of upstream manufacturers.

Peyton Technology, a subsidiary of Peyton Technology, has been focused on storage closed testing for 17 years, and is in the leading position in technology and technology industry: Peyton Technology, a wholly owned subsidiary of the company, specializes in packaging and testing of memory chips, and has an industry-leading packaging and testing production line and 17 years of mass production experience. Peyton Technology's product technology and manufacturing technology are in the forefront of the industry among domestic and international counterparts. In recent years, enterprises with complete industrial chains ranging from high-end DRAM / Flash wafer packaging and testing of integrated circuits to module production have continued to develop advanced packaging and testing technology, further promoted storage projects, and carried out strategic cooperation with domestic leading memory chip enterprises. According to the announcement, the company can provide one-stop services from chip closed testing, SMT manufacturing, IC assembly to chip sales, from packaging wafers to the completion of finished memory in less than 7 days, leading the industry. 8Gb/16Gb DDR4 has passed the verification and formal delivery of a number of major customers at home and abroad in 2019. At present, on the basis of storage closed test 17nm mass production, the company continues to promote the technical iteration of more sophisticated 10nm-level DRAM products. Shenzhen Technology's current closed testing technology can cover mainstream memory products and has the mass production capacity of LPDDR3, LPDDR4 and SSD SSD. At the same time, under the industry trend of high speed, low power consumption and large capacity of memory chips at home and abroad, Shenzhen Science and Technology continues to promote the technology development of new products such as DDR5 and LPDDR5, and has the closed testing capability of the latest generation of DRAM products.

Main business transformation and upgrading, focus on closed test golden track: due to the simple assembly business model of deep technology Guilin does not have high added value, coupled with increasing market competition, facing increasing operating pressure, the company previously announced that it will jointly invest with Guilin Hi-Tech Group and Lingyi Zhishao to set up Bosheng Technology (34%, 36%, 30% equity respectively), which will acquire Shenzhen Science and Technology Guilin. After the completion of the above integration, Shenzhen Science and Technology Guilin will no longer be included in the scope of consolidated statements of listed companies.

Through this integration, on the one hand, we can make full use of the advantages of all parties to achieve the combination of strong and strong, and jointly enhance the profitability of Shenzhen Science and Technology Guilin; second, it will help the company to deepen its main business transformation and focus on storage semiconductor closed testing and high-end manufacturing business. At present, the high-end memory closed testing industry is in a state of rapid development, but the localization rate is low and the domestic substitution space is huge. Under the tide of localization substitution development in the semiconductor industry, the company focuses on developing memory semiconductor closed testing, which will smoothly promote the company's industrial chain to extend to high value-added mid-upstream memory chip packaging testing, realize the transformation and upgrading of its main business, and lay the foundation for the long-term layout of the company's intelligent manufacturing.

Investment suggestion: we estimate that the company's income from 2020 to 2022 will be 14.942 billion yuan, 21.665 billion yuan and 27.298 billion yuan respectively, and the net profit will be 842 million yuan, 1.048 billion yuan and 1.358 billion yuan respectively, maintaining the "buy-A" investment rating.

Risk tips: the release of domestic memory capacity is lower than expected, resulting in less than expected demand; Hefei Peitun project construction is not up to expectations.