The three major businesses of laser application services, intelligent equipment, aviation parts processing and 3D printing are working together, and the value of military business is gradually highlighted. Focusing on laser services, the company acquired Shanghai Dongtang layout intelligent equipment business in 2017 to achieve a vertical extension of the industrial chain; in 2019, it acquired a 51% stake in Chengdu Tongyu, cut into the aviation parts manufacturing business, and expanded 3D printing to the military field. In November 2020, it announced the acquisition of the remaining 49% stake in Chengdu Tongyu.
At present, the company has formed the three major businesses of laser application services, intelligent equipment, aviation parts processing and 3D printing to go hand in hand. The 2020 semi-annual report shows that the three major businesses account for 51%, 40% and 8% of receivables, respectively. Smart equipment and aviation business account for a gradual increase.
It is expected that with the gradual expansion of the application of new aircraft and 3D printing in the aerospace field, the value of military business will be gradually highlighted.
Focus on laser application services, vertically extend the layout of intelligent equipment, and strengthen the overall solution capability. 1) Laser application services mainly include SMT, PCB and 3D printing. The main products of the company are SMT laser templates in the early days of its establishment. It began to engage in PCB precision molding business in 2005 and entered the 3D printing business in 2013.
SMT plate: SMT laser template is one of the products with relatively large revenue. The company is the largest SMT laser template manufacturer in China, with the first production capacity, output, equipment quantity and revenue in the same industry. It has maintained a growth rate of more than 20% in the past three years and is expected to maintain steady growth.
PCB plate: the company is the first company in China to use laser technology for circuit board forming and drilling, and its revenue ranks in the forefront of its peers. In addition, it has independently developed an unmanned PCB laser drilling factory to improve production efficiency, and has reached a strategic cooperation agreement with a number of customers. 5G commercial brings huge consumption of core processes such as HDI laser drilling, and it is expected that PCB business will have a better expectation. 3D printing: domestic enterprises that applied 3D printing technology to industrial, medical, cultural and creative fields earlier, with the increase of penetration and the expansion of application fields, there is a broad market space. 2) Vertical extension layout intelligent equipment business, intelligent equipment business represents the subsidiary Shanghai Jindongtang, the main products include intelligent testing equipment, laser equipment and automation equipment. The company continues to optimize the product structure, consolidate and expand the automation equipment market, from traditional consumer electronics to automotive electronics, display panels, new energy industries, the market demand space is huge. In the first half of this year, due to the epidemic and the downturn in the electronics consumer industry, the production capacity of the Jiaxing production base has not yet reached expectations, while the company's early investment in automated production equipment is relatively large, the net profit in the first half of this year decreased by 68.38% compared with the same period last year. However, with 5G promoting the development of the electronics industry, Jiaxing production base to achieve capacity standards and market expansion, it is expected to achieve better growth in the future.
With the expansion of new aircraft and the improvement of aviation 3D printing penetration, the value of military industry is gradually highlighted.
In 2019, the company cut into the military industry with the help of Chengdu Tongyu, and expanded its 3D printing business to the military industry. On the one hand, Chengdu Tongyu is mainly engaged in tooling and aviation parts business, has obvious advantages in the industrial chain with long-term cooperation with Chengfei, has strong technical reserves and operating performance, and benefits from the volume of new aircraft and the increased proportion of Chengfei outsourcing; on the other hand, Chengdu Tongyu 3D printing business is highly coordinated with the company, which is expected to enhance the company's comprehensive competitiveness in the aerospace field and 3D printing business, and achieve rapid growth in performance. Chengdu Tongyu betted 4000, 5000 and 60 million (excluding 3D printing) in 2020-2022, and the military value is expected to be gradually highlighted with the increase in the volume of military aircraft and the penetration of 3D printing in the aerospace sector.
Then push the equity incentive to demonstrate the company's determination for future development. Following the restricted stock in 2014 and the employee stock ownership plan in 2018, the company launched the equity incentive plan again in November 2019. 7.5 million stock options are granted to 125 incentive targets. The net profit assessment target for 2020 is 83%, 141% and 222% respectively compared with 2018, which demonstrates the company's confidence and determination for future development.
Investment suggestion: the company revolves around laser manufacturing, vertically realizes the layout of the whole industry chain, strengthens the overall solution capacity, benefits from the general trend of 5G commercialization and the expansion of the company's production capacity, and cuts into the military business through Chengdu Tongyu. With the expansion of new aircraft and the improvement of aviation 3D printing penetration, the value of military business is gradually highlighted. We expect the company's 2020-2022 net profit to be 130 million, 180 million and 240 million yuan, corresponding to the PE of 46X, 32X and 24X, covering for the first time, with a "buy-A" rating.
Risk tips: the epidemic situation and Sino-US trade frictions affect the development of the electronics industry, the progress of military aircraft replacement is not as expected, and the military industrial expansion of 3D printing business is not as expected.