Event: The company expects net profit of 163-203 million yuan in the first quarter of 2021, an increase of 100%-150% over the previous year.
Key points of investment
Advantage businesses such as storage, packaging and testing and electronics manufacturing continued to expand, and the company's 2021Q1 performance grew rapidly:
The company expects its net profit to increase 100%-150% year-on-year in the first quarter of 2021. During the reporting period, the company focused on developing the storage semiconductor business and continuously optimizing the business structure on the basis of maintaining the core business of high-end manufacturing. The production capacity of the company's memory chip sealing and testing business was still in short supply, production was at full capacity, and the sealing and testing business continued to maintain a good momentum of development. At the same time, the company has continuously increased its innovation efforts, taken many measures to expand advantageous businesses and improve operational efficiency. The company's overall production and operation conditions are good, and profits from the main business have increased by a certain margin compared to the same period last year.
Furthermore, the company made full use of financial derivatives to avoid the risk of exchange rate fluctuations. The sum of the maturing delivery income of financial derivatives and the income from unexpired changes in fair value increased year-on-year during the reporting period, leading to an increase in the company's non-recurring profit and loss.
Local memory sealing and testing leaders highlight their central position in the local memory sealing and testing industry chain: the company's sealing and testing technology covers high-end memory chip products such as DRAM and NAND, has DDR4, PDDR4, and sealing and testing capabilities, and continues to promote the technical development of new products such as DDR5 and GDDR5; the company's advanced memory packaging technology is synchronized with world-class enterprises, and the testing technology layout is perfect. The company's 8-layer chips have been mass-produced, and the machine can stack up to 16 layers of chips, with outstanding technical competitiveness; at present, the company is the only domestic company with high-end DRAM/ An enterprise with a complete module manufacturing industry chain can complete the packaging wafer to memory finished product process within 7 days, which is at the leading level in the industry. At the same time, the company is also the largest independent DRAM memory chip packaging and testing enterprise in China, with a prominent leading position in the field of local memory sealing and testing. Currently, the company has invested heavily in the field of memory sealing and testing, expanding production capacity in Shenzhen and Hefei factories, and continuously consolidating and expanding its competitive advantage; the company's memory sealing and testing connects with the resources of leading domestic and foreign customers such as Kingston and Hefei Changxin, which highlights its core position in the domestic memory sealing and testing industry.
EMS has a leading position in the market, divesting low-value-added businesses to focus on high-growth areas: the expansion of the scale and upgrading of electronic applications drives the continuous development of the EMS market. By divesting its low value-added business, the company's EMS focuses on intelligent manufacturing for high-growth applications such as medical/new energy vehicles/metering systems. According to MMI's 2020 list of the world's 50 largest EMS foundries, the company's business scale ranked 14th among global EMS manufacturers and 3rd in mainland China, with remarkable market advantage.
Profit forecast and investment rating: We maintain the 2020/2021/2022 net profit forecast of 8.42/10.95/1,517 billion yuan, corresponding to the 2020/2021/2022 EPS of 0.57/0.74/1.03 yuan.
The current market capitalization corresponds to the 2020/2021/2022 PE of 34/26/19 times, maintaining the “buy” rating.
Risk warning: Market demand falls short of expectations; new product launches fall short of expectations; customer development falls short of expectations.
