Event: in 2020, the company is expected to achieve operating income of 2.121 billion yuan, an increase of 20.62% over the same period last year, with a net profit of 136 million yuan, down 10.17% from the same period last year, deducting 104 million yuan from non-parent net profit, down 24.65% from the same period last year.

In the first quarter of 2021, the company achieved operating income of 832 million yuan, an increase of 88.53% over the same period last year, and a net profit of 77 million yuan, an increase of 140.10% over the same period last year, deducting 71 million yuan of non-return net profit, an increase of 162.82% over the same period last year.

The short-term impact of the rise in raw material prices dissipated, ushering in a sweet period of profit release. The company is one of the top 20 and top three suppliers of copper clad laminates and semi-cured bonded sheets in the world. After years of development, it has established long-term and stable cooperative relations with well-known PCB manufacturers such as Jian Ding Group, Aoshikang, Jingwang Electronics, Hanyubod, Shennan Circuit and other well-known copper clad laminates. In 2020, under the condition that Jiangxi Phase 1 new production capacity was put into production and climbed the slope, the company's business income achieved steady growth. However, due to the impact of the increase in the price of upstream raw materials, the company's gross profit margin is under pressure. The company's operating profit in 2020 is expected to decline by 9.66% to 153 million yuan. Especially in the third and fourth quarters, the negative impact of the price increase of upstream raw materials is extremely obvious. The gross profit margin in these two quarters was only 13.26% and 14.14%, respectively, which decreased by 7.05 pct. compared with the same period in 2019. At the same time with 1.85 pct., during the reporting period, the company committed to the introduction of high-frequency and high-speed plates to domestic first-line communications and server terminal customers, resulting in a substantial increase in the company's overall R & D expenses. Under the superimposed influence of multiple factors, the company's performance declined slightly in 2020 compared with the same period last year.

In the first quarter of this year, domestic copper clad laminate factories have transmitted the upward pressure of upstream copper foil prices to terminal customers to a large extent. Q1 gross profit margin in South Asia has rebounded rapidly, and performance elasticity has been well released, and in the long run, the stabilization and decline of copper prices in the future is expected to create a sweet profit window for copper clad laminate manufacturers for a certain period of time, which means that the company's main profit bleeding point in the second half of last year is gradually stopping bleeding. As the IPO investment production line enters the production stage, the new production line yield and growth rate continue to rise, and the number of plates imported into communications and server customers in 2020 is gradually increasing, the company is expected to step into the track of high performance growth.

Positioning of high-end plate, strong growth attributes of domestic copper clad laminate enterprises. The evolution of copper clad laminate technology has experienced the upgrading process of "ordinary plate-lead-free halogen-free laminate-high frequency high speed / vehicle / IC package / high thermal conductivity plate". The pricing of traditional copper clad laminate is largely affected by the price of upstream raw materials, but with the improvement of sheet specifications, the "technical content" of copper clad laminate price is relatively clear, so the profit level of high-end laminate is relatively high and stable. In addition, the profit level of high-end laminate is relatively high and stable. Due to the high competition barriers constructed by technology and material formulations, the pattern of high-end copper clad laminate market such as high frequency and high speed is more concentrated than that of the overall copper clad laminate market, and the core players are mainly European, American and Japanese enterprises, and domestic enterprises are still in a state of catch-up. Fortunately, no matter in the field of 5G base stations or servers, the voice of domestic terminal manufacturers is gradually increasing, and in the PCB link, there is no lack of excellent enterprises such as Shennan Circuit, Shengyi Electronics, Jingwang Electronics, Xingsen Technology and so on. For the copper clad laminate industry, it is a relatively clear trend to cooperate with downstream PCB and end customers to realize the localization of high-end laminates. The high-end copper clad laminate track has a strong growth attribute.

The company mainly locates high-end plate, and the proportion of ordinary board income has dropped to less than 15%. Lead-free halogen-free plate is the main source of income of the company. High-speed board has passed the certification of domestic communications and server core manufacturers. High-frequency board, vehicle board, IC packaging board also have technology and customer reserves. What is particularly noteworthy is that with the arrival of 5G and the upgrade of Intel server platform to Whireley and Eagle Stream, "Low Loss" and "Very Low Loss" levels of high-speed CCL, the demand for high-speed CCL will increase, benefiting from the trend of domestic substitution, the company's priority technology layout and customer certification in the field of high-speed board are expected to gradually become a booster for the company's performance growth.

Raise funds to expand production and set the tone for growth. By 2017, the company has a production capacity of about 1280 sheets per year, and the overall capacity utilization rate has been close to 95%. Therefore, the company has started to build a factory in Jiangxi since 2017, with an overall planned capacity of 5760 million sheets per year. it is about four times the original production capacity of Shanghai. At present, the production capacity of the company's Jiangxi No.1 Plant has been basically completed and put into operation, and the production capacity has reached production capacity, which has doubled compared with 2019. In 2021, the high demand downstream provides an opportunity for the company to fully release its new production capacity, and the company's revenue scale is expected to usher in further growth.

Profit forecast and rating: cover for the first time and give a buy rating. On the basis of orderly expansion of production capacity, the continuous improvement of product structure and customer structure is expected to further enhance the company's profitability. It is estimated that the company's net profit from 2021 to 2023 is 306 million yuan, 4.24 yuan and 552 million yuan respectively. The current stock price corresponds to 24.44,17.64 and 13.57 times of PE, covering for the first time and giving buying rating.

Risk tips: (1) the upstream raw material prices continue to rise sharply to weaken the company's profitability; (2) the easing of downstream demand shortage leads to a decline in the company's product prices; and (3) the progress of high-frequency and high-speed copper clad laminate track is intensified.