I. Incident Overview
On April 14, the company released the 2020 annual performance report, with revenue of 3.6 billion yuan in 2020, an increase of 9% over the previous year; Guimu's net profit was 180 million yuan, an increase of 15% over the previous year. At the same time, net profit returned to the mother for 21Q1 is predicted to be 23—280 million yuan, an increase of 580%-720% over the previous year.
II. Analysis and Judgment
Q1 performance increased sharply, and Q2 price increases continued. The quarterly increase in annual performance was calculated according to the median forecast. According to the median forecast calculation, Q1 achieved 260 million yuan, an increase of 650% over the previous year, and a sharp increase of 189% over the previous month. Furthermore, the first quarter was low and then high. A new round of price increases in the industry in the second quarter has already begun, and the company is expected to continue the high growth trend of performance in the first quarter. Beginning in August 2020, market demand gradually increased, and the pandemic drove strong demand for home appliances, computers, communications, and network products. We believe that this year is the year in which the market demand for copper-clad plates has been greatest in the past 20 years. The unit price in the industry has more than doubled since last year, and the trend has not stopped. The industry's supply shortage is expected to continue for a long time.
The copper-clad plate market is becoming more and more intense, and the company's performance is extremely flexible
Price increases in the industry have already begun in the second quarter, upstream copper prices have continued to be high, prices for fiberglass cloth have been adjusted in April, and resin supply continues to be tight. We expect the price of copper-clad sheets to continue to rise in the second quarter. Furthermore, the expansion of production by copper-clad companies was limited this year. The large factories built only a small portion of their production capacity to expand production. The new capacity added by some small factories was not enough to disrupt the market, and the supply shortage situation is expected to continue throughout this year. At the same time, Jin An has a tight upstream production capacity for fiberglass cloth, and its performance flexibility is huge.
III. Investment Suggestions
We expect the company's revenue to reach 36/71/89 billion yuan in 2020-22 and net profit to the mother to 2/12/12 billion yuan, corresponding to 53/8/8 times the valuation. Referring to SW Electronics' 2021/4/14 latest TTM valuation 43 times, we think the company underestimated it, covered it for the first time, and gave it a “recommended” rating.
IV. Risk Reminder
The increase in raw material prices fell short of expectations, the expansion of production capacity fell short of expectations, etc.
