Laminate leader, with the first market share for 15 years in a row, is a leading manufacturer of vertically integrated electronic materials in the industry, focusing on the production of laminates. According to the research report of Prismark Partners LLC, a third-party consultant, the company has been the number one laminate market in the world for 15 years in a row, with a market share of about 16% in 19 years. The company's performance is affected by upstream raw materials and downstream demand. Affected by the epidemic shutdown and the contraction of the real estate business in 20 years, overall revenue declined, but due to the high boom in the laminate industry in the second half of the year, the company's profit margin rose to 16%, and net profit increased by 17% compared with the same period last year.
Vertical integration + product structure is mainly at the middle and low end, and the company with the greatest flexibility in the price rise cycle adopts a vertically integrated production structure. while developing the laminate business, it covers the production of upstream raw materials (copper foil, glass yarn, fiberglass cloth, bleached wood pulp paper and epoxy resin). With the vertically integrated production mode, the company can fully enjoy the double dividend of the price increase of laminate products and upstream materials during the price increase cycle. The company's main products include epoxy fiberglass laminated panels and fireproof paper laminated panels, which belong to middle and low-end products. FR-4, the main product of the company, is the largest type of copper clad panels used in the electronics industry, which is the most flexible in the case of rising raw material prices and tight supply.
20Q4 starts a new cycle of price increases, and the company is expected to benefit first.
Since the second half of 20 years, the supply of raw materials directly upstream of laminates has been tight, and the price has been on the rise. Upstream copper prices soared, standard copper foil processing capacity was squeezed by lithium copper foil, copper foil processing fees rose. The prices of epoxy resin and fiberglass cloth are also rising due to tight supply. The company has started to raise product prices many times in the second half of 20 years, and a new round of price increase cycle has been launched. With reference to the last round of 16-17 price increase cycle, the price increase of raw materials provides strong support for the price increase of the company's products. Due to the strong downstream demand, the products of the company get a premium, driving the growth of both revenue and profit margins, and the profitability is significantly improved.
The rising momentum of this round of raw material prices is even stronger, and the demand for economic recovery in the lower reaches of the post-epidemic era has warmed up. 5G, new energy vehicles and data center construction contribute new demand growth points. Driven by the rising price of raw materials and demand, the company is expected to give priority to benefit.
It is expected to benefit from the high-end product structure in the medium and long term.
In the long run, the company actively promotes the production and sales of high value-added laminates such as sheet, halogen-free laminates and high-temperature resistant laminates, and promotes the optimization and upgrading of the product portfolio. The transformation of the company's products to high-end products can effectively improve the product ASP and gross profit margin, achieve revenue growth and profit margin improvement, the company's development is expected.
Investment suggestion: give the company 21-23 revenue of HK $274.4 billion, yoy+58.6%/+1.7%/-2.7%, net profit of HK $61.38 billion, yoy+145%/-11%/-12%. Considering the persistence of this price rise cycle and the liquidity of Hong Kong stocks, the company is given a "buy" rating corresponding to the target price of HK $21.98 per share with a 21-year 10x PE.
Risk tips: lower-than-expected demand, cost pressure can not be effectively transmitted, raw material price fluctuations