Benefiting from the continued growth of the target material business, the rapid growth of the platinum group metals business, and mergers and acquisitions in the magnetic materials sector, the company achieved net profit of 170 million yuan in 2020, +60.7% year-on-year, and the performance was in line with expectations. “Electromagnetic photomedicine”
The four major businesses have entered a harvest period, and key products in the target materials business have been supplied in large quantities. It is expected that in the future they will benefit from the high demand in the semiconductor industry and become the main driving force for the company's performance. Give the company 50 times PE in 2021, corresponding to the target price of 17.1 yuan, maintaining the “buy” rating.
The company's net profit to the parent grew steadily in 2020, a year-on-year increase of 60.74%. The company achieved revenue of 12.969 billion yuan in 2020, +24.08% over the same period last year, and achieved 111% of the annual budget target; achieved net profit attributable to mother/net profit of 1070/93 million yuan after deducting non-return mother's net profit, +60.74%/+68.95% year on year. The main reasons for the increase in performance in 2020 were: 1) the target material business continued to grow dramatically; 2) sales revenue of precious metal materials represented by platinum group metals increased dramatically; 3) due to mergers and acquisitions in the magnetic materials sector, the company's rare earth product sales revenue and production and sales volume increased year-on-year; 4) measures such as improving production processes, improving asset use efficiency, and saving expenses, and reduced costs by more than 22 million yuan in 2020.
The target materials business is already gaining strength, and it is expected to be the main driving force for the company's performance in the future. In 2020, Youyan Yijin achieved key technological breakthroughs in more than ten 12-inch high-purity metal sputtering target products. The products covered many high-end customers such as SMIC, Changjiang Storage, Dalian Intel, TSMC, and Beifang Huachuang. In 2020, 8-12 inch targets accounted for 2/3 of overall target sales, and the product was transformed from mainly 4-6 inch to 12-inch target products. Among them, sales of 12-inch targets increased 115% year-on-year. With the development opportunities for domestic targets brought about by the future shift of the semiconductor industry chain to the country, the scale of the target material industry is expected to grow by more than 10%. After the construction of the second superimposed target base is completed, production capacity will at least double, and the company's performance is expected to continue to grow dramatically.
The results of corporate mergers and acquisitions integration, transformation of scientific research results, and market development have been shown, and performance has entered a harvest period. 1) Magnetic sector: Achieve rapid integration between Hongxiushan Magnetic Industry and Magnet, enter the field of high-performance NdFeB magnets in the electroacoustic field, and are expected to enjoy increased performance brought about by the boom in the high-end magnetic materials industry in the future; 2) Optical sector: Youyan Optoelectronics is an internationally leading manufacturer of gallium arsenide monocrystals with the largest level of gallium arsenide monocrystalline production capacity in China; 3) Medical sector: complete the phased goal of building an orthodontic product family, actively promote the layout of the digital medical device industry, and launch the first digital dental medical device product to establish the foundation for work around dentistry.
Risk factors: Target production capacity release falls short of expectations, semiconductor industry demand falls short of expectations, and epidemic uncertainty.
Investment advice: With the gradual easing of the epidemic, the company's “electromagnetic photomedicine” business segments have all entered a performance release period. In particular, the target materials business is expected to benefit from the boom in the semiconductor industry and grow rapidly. However, considering that the company's production capacity progress is lower than our previous expectations, we lowered the company's net profit forecast for 2021-2023 to 289/468 million yuan (the original 2021-2022 forecast was 391/588 million yuan), adding 616 million yuan to the 2023 EPS forecast of 0.34/0.55/0.73 yuan/share corresponding to the 2021-2023 EPS forecast of 0.34/0.55/0.73 yuan/share, which corresponds to the target price of 17.1 yuan for the next year, maintaining the company's “buy” rating.
