The performance was in line with expectations and the “buy” rating was maintained.
At 2021Q1, the company achieved revenue of 8.272 billion yuan, +26.1% year on year, +26.3% month on month; realized net profit of 519 million yuan, 72.1% year on year, up 112.7% month on month; deducted non-net profit of 339 million yuan, 238.0% year on year, +73.8% month on month. Performance was in line with expectations. We maintain our previous profit forecast. We expect that from 2021-2023, the company will achieve net profit of 16.22/19.25/2,394 billion yuan, EPS of 0.66/0.78/0.97 yuan, and the current stock price corresponding to PE of 21.1/17.7/14.3 times, maintaining the “buy” rating.
Demand for smartphones boosts revenue, and changes in product structures affect gross profit margins.
2021Q1, the company achieved a year-on-month increase in revenue, mainly driven by downstream mobile phone demand. According to data from the Academy of Information and Communications Technology, domestic mobile phone sales in the first quarter were 97.97 million units, an increase of 100% over the previous year and +19.0% over the previous year. The gross profit margin for the single quarter of 2021Q1 was 16.6%, which was basically the same as the previous year, down 6.2 percentage points from the previous month. This was mainly due to changes in product structure, an increase in the share of mobile phone (which has a slightly lower gross margin) shipments, and a decline in the share of professional display shipments. Expense control has improved. The cost rate for the first quarter was 11.1%, down 3.7 percentage points from the previous year, mainly due to an increase in scale. Thanks to cost control, the company's net interest rate increased 1.7 percentage points in the first quarter.
Inventory turnover has increased markedly, and large-scale release of flexible AMOLED production capacity is imminent.
The inventory turnover rate for the first quarter was 271.4%, a record high, and the number of inventory turnover days was 33 days, at the bottom of history. Wuhan's G6 production capacity climbed smoothly. Projects under construction in the first quarter amounted to 29.67 billion yuan, the highest level in history, mainly the Wuhan Tianma G6 production line. At present, Wuhan Tianma G6 (TM17) production capacity has been released on a large scale, and stable batch delivery has been achieved to major mobile phone brand customers. More flexible product projects for brand customers are being introduced one after another, and the company's flexible production capacity is expected to be released in large quantities in 2021. As mass production progresses, the company's projects under construction will also be consolidated one after another, and will form the cornerstone of the company's growth in the next few years. As a result, the company will officially enter a new round of AMOLED-driven development.
Risk warning: Risk of falling mobile phone panel prices, increased trade conflict between China and the US, and risk of falling demand.
