2021Q1's profit accelerated month-on-month, and the flexibility of copper-clad plate price increases was remarkable. Maintaining the “buy” rating, the company released its 2020 annual report and 202Q1 quarterly report. Of these, 2020Q4 achieved operating income of 1.24 billion yuan and net profit of 88 million yuan. At the same time, the company released the 2021 Q1 quarterly report, with a single quarterly revenue of 1.34 billion yuan, YoY +119.1%, and a net profit of 260 million yuan and YoY +657.8%. Considering that leading copper-clad board manufacturers are optimistic about annual demand and price prospects, the copper-clad plate industry will gradually enter the peak season, and the supply-demand relationship will still be tight, driving continuous price increases for copper clad boards. We maintain the 2021-2023 profit forecast of 1.8/15.1/2.06 billion yuan, EPS of 0.25/2.07/2.83 yuan, and the current stock price corresponding to PE is 62.1/7.4/5.4 times, maintaining the “buy” rating.
The operating rate of 2020H2 copper-clad plates is full. The price ushered in an upward inflection point. The company's 2020 H1 sales revenue related to copper clad plates was 1.26 billion yuan, 2020H2 reached 2.06 billion yuan, an increase of 63.8% over the previous month, 2020H1 sales volume reached 16.253 million units, an average unit price of 77.5 yuan/sheet, 2020 H2 sales volume reached 243.61 million sheets, and the average unit price reached 84.7 yuan/sheet, up 9.3% from the first half of the year. Since 2020Q3, the recovery in demand for downstream home appliances and automotive products has led to a full utilization rate of the company's copper-clad plate production capacity. The price increase for copper-clad sheets brought significant profit elasticity, driving the company's gross margin to 22.5% in a single quarter of 2020Q4, an increase of 6.6 pct over the previous quarter. Looking ahead to the full year of 2021, the company is expected to expand production capacity through technical improvements at the existing plant and the addition of reserved production lines at the Hangzhou plant. There is still room for improvement in copper clad plate shipments.
The copper-clad plate price increase cycle is expected to continue throughout 2021. The company's profit performance surpassed that of peers and benefited from the copper-clad plate price increase. 2021Q1's revenue was still not weak in the off-season, reaching a record high for the same period. In terms of profitability, 2021Q1 achieved gross margin of 29.4%, net margin of 19.3%, an increase of 12.2 pct over 2020Q4. The company realizes cost optimization through vertical integration of upstream glass fiber materials. It is expected that the company will put into operation the Ningguo project in 2021. Since the automated production capacity of the new production line is superior to that of the existing plant, the manufacturing cost side will drop further, further squeezing competitors in the middle and low end copper clad plate market.
Risk warning: The accelerated rise in raw material costs led to a decline in the company's gross margin; the improvement in the company's product structure fell short of expectations; the decline in PCB sentiment led to a decline in the price of the company's copper clad board products; competition in the copper-clad plate industry intensified.
