Brief comment on performance
On August 4, the company announced its semi-annual report of 2021, which showed that 21H1 achieved 1.99 billion yuan in revenue (+ 119% compared with the same period last year) and 220 million yuan in net profit (+ 229% compared with the same period last year), of which 220 million yuan was deducted from non-homed net profit (+ 241% compared with the same period last year). The gross profit margin and net profit margin reached 19.4% (year-on-year + 2.4pct) and 11.1% (year-on-year + 3.7pct) respectively. 21Q2 achieved revenue of 1.16 billion yuan (year-on-year + 147%, month-on-month + 40%) and mother-to-mother net profit of 140 million yuan (year-on-year + 312%, month-on-month 86%), of which non-return net profit was 140 million yuan (year-on-year + 304%, month-on-month + 92%). 21Q2 gross profit and net profit reached 19.7% (year-on-year + 1.9pct, month-on-month + 0.8pct) and 12.3% (year-on-year + 4.9pct, month-on-month + 3.0pct), respectively, and the performance exceeded expectations.
Business analysis
Profitability has improved significantly and is expected to be stable in the second half of the year. The increase in price premium and the diluted expenses for the commissioning of the Jiangxi N4 plant have raised the company's Q2 gross profit margin to a high level of 19.7%. If the transportation expenses of the operating cost (the original caliber is confirmed in the sales expense) are deducted according to a comparable caliber, the company's Q2 single-quarter gross profit margin has exceeded 20%, which shows that the company's profit has been greatly improved. Looking forward to the second half of the year, with the decline in raw material prices and the easing of supply and demand pressure, the price of the copper clad laminate industry is difficult to grow again, but the overall order of the company is full, so there is a strong certainty to ensure the stability of unit gross margin during bargaining.
Actively expand production + the volume of high-end products, profit growth is guaranteed. We believe that the driving force for the future growth of the company comes from three aspects: 1) the compound growth of effective production capacity of 26% in three years. The company has opened a new plant in Jiangxi. According to the progress of the project, it is expected that the compound growth rate of effective capacity in 2021-2023 will reach 26%, and the release of capacity will lay the foundation for growth. 2) Jiangxi plant operation will rationalize and harvest profits. Starting from this year, Jiangxi factory production line began to run smoothly, of which N4 factory 3 production lines are now all full production, cost dilution has begun to show results, the future N5 and subsequent factory production will further dilute costs, profit bondage is expected to be eliminated; 3) high-end products through certification is expected to be volume. The company is one of the early manufacturers of high-speed copper clad laminates in China, and is currently the only mainland copper clad laminate manufacturer certified by Huawei for all kinds of high-speed products, and the company is still continuing to develop high-end new products. we believe that the volume of high-end products will provide a guarantee for the company's long-term growth.
Investment suggestion
In view of the company's profit from price increases, dilution of production expansion expenses and better-than-expected progress in the introduction of major customers, we increase our 23-year profit forecast to 4.2 (+ 37%)\ 5.8 (+ 41%)\ 720 million yuan (+ 51%), corresponding to a PE of 26X\ 19X\ 15X, and continue to give a "buy" rating.
Risk tips: demand is lower than expected; falling prices lead to lower-than-expected profits; and restricted shares are lifted.