Investment logic
The 36th communication PCB manufacturer in the world is expanding its production in depth and diversified layout. The company is the manufacturer of communications-focused PCB ranked 36th in the world and 18th in China (communications accounts for 81.2%). On this basis, the company began to seek diversified development (server, automotive, etc.), and actively expand production to support business layout. The company accelerates the production capacity layout through IPO and self-financing: 1) IPO, the fund-raising projects mainly include Dongcheng Phase IV, Ji'an Phase II, R & D center construction projects and supplementary working capital. After reaching production, it is expected to increase production capacity by 883000 square meters per year and increase profits by 830 million yuan. 2) by self-financing, the company has reserved Ji'an Phase I and Ji'an reserved projects. We expect Ji'an Phase I to increase production capacity by 700000 square meters per year and increase profits by 160 million yuan. Taken together, the company's expected capacity increment space is 1.583 million square meters per year (relative to the current growth rate of 172%), and the expected profit increment space is 990 million yuan (relative to the 2020 growth rate of 226%). Future growth is expected.
Communication is under short-term pressure, medium-and long-term space and certainty are still there. Sino-US trade frictions and the global epidemic put pressure on the demand in the communications field. In the short term and long term: 1) in the short term, we estimate that the PCB market for 5G base stations will decline by 22% year on year this year, but in terms of rhythm, the construction volume in the first half of the year is low, so there may be a fundamental inflection point in the second half of the year. 2) in the long run, based on the following three factors: the construction of 5G base stations will continue (2.52 million stations will be built by 2023), the resumption of overseas outbreaks will promote a new round of infrastructure tide, and the cable network construction will follow up (the PCB scale of the cable network is 1.8 times that of the base station PCB and will maintain a compound growth rate of 5.7% in the next five years). We believe that the demand for communication PCB is still spatial and deterministic.
Server + automotive product upgrade, PCB leader to meet the opportunity. The upgrade of the server platform will put forward new requirements for the number of layers and technology of PCB, thus increasing the value of server PCB. We expect the value of server PCB to increase by 8.4% in the next 5 years. The trend of car electrification and intelligence has greatly increased the value of PCB per car to 2000 yuan per car, so the car PCB will usher in a high growth trend. Based on the technology, customers and major shareholder resources accumulated in the field of communications, Shengyi Electronics has successfully cut into the two major fields of server and automobile, and has a high competitiveness in the market, and the diversified layout is worth looking forward to.
Investment suggestion
We estimate that the company's net return profit in 2021 and 2023 will reach 3.79 yuan 5.44 yuan, corresponding to EPS 0.46 yuan 0.65 yuan 1.03 yuan. Based on the 2023 net profit, 25% growth rate and PEG=0.88 calculation, we finally determine that the reasonable market capitalization of the company is 18.9 billion yuan, the corresponding target price is 22.81 yuan, and the "buy" rating is given for the first time.
Risk
Industry expansion leads to a decline in prices; the rise in the price of upstream raw materials leads to a rise in production costs; the schedule of investment projects is not as expected; demand is not as expected; and the risk of lifting the ban on restricted shares.