Benefiting from the continuous 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 a sharp increase in revenue from various products in the first quarter of 2021, achieving net profit of 62 million yuan, +803.2% /+195.1% year-on-year. The performance was in line with expectations. The four major “electromagnetic photomedicine” businesses have entered a harvest period, and key products in the target materials business have been supplied in large quantities. It is expected that they will benefit from the high demand in the semiconductor industry in the future, which will become the main driving force for the company's performance. The company was given a target price of 17.1 yuan, corresponding to 50 times PE in 2021 to maintain the “buy” rating.
The company's net profit to the mother increased sharply in the first quarter of 2021, +803.19%/+195.08% year-on-year. The company achieved revenue of 3.645 billion yuan in 2021/Q1, +63.87%/-14.03% year-on-year; achieved net profit of 62 million yuan, +803.19%/+195.08% year-on-year; and achieved net profit of 47 million yuan after deducting non-Gumi, which changed from negative to positive year-on-year. The main reasons are: 1) the sales business is growing rapidly, and the credit period for sales repayment is longer; 2) the increase in the stocking of raw materials; and 3) the increase in taxes and employee remuneration paid. 2020Q1 has achieved significant revenue growth for all types of products, and overall product profit margins have increased.
The target materials business is already gaining strength and is expected to be the main driving force for the company's performance. 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% over the same period last year. With domestic target development opportunities 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 at a rate of more than 10%. Combined with the expansion of target production capacity, 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: The release of target material production capacity fell short of expectations, demand in the semiconductor industry fell short of expectations, and uncertainty about the epidemic.
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. We maintain the company's net profit forecast for 2021-2023 at 289/468/616 million yuan, corresponding to the 2021-2023 EPS forecast of 0.34/0.55/0.73 yuan/share, giving the company 50xPE in 2021, corresponding to the target price of 17.1 yuan in 2021, and maintaining the company's “buy” rating.
