Main points of investment:
Significant marginal improvements in sapphire costs and effective production capacity have prompted sapphire to start expanding in the consumer electronics sector, the first year of the sapphire industry in 2016. The production cost of sapphire has been greatly reduced due to the significant improvement of sapphire production technology and the sharp reduction of upstream raw materials and related costs. According to the industry chain research, the final cost of consumer electronics sapphire cover is reduced to about $30 per piece, and the cost price of about 200 yuan is theoretically acceptable for both middle and high-end mobile phones. And the current effective production capacity of the industry can at least meet the shipments of more than 20 million mobile phones. With the expansion of consumer electronics and further improvement in price and production capacity, we expect that the price of sapphire cover will eventually fall to the region of $10-15, which will once again promote the development of the industry as a whole.
The space in the field of consumer electronics is close to 40 billion, and the growth trajectory of the industry is clear in the next two to three years. With the rapid growth of Ored's sales and the continuous optimization and improvement of technology, the cost of sapphire will be further reduced, and we expect 40% of mobile phones to use sapphire as a screen saver cover in the future. We estimate that by 2020, the market space of sapphire in the consumer electronics field will be about 34 billion, of which the application market space of sapphire cover in mobile phones will be as high as 32 billion. With the continuous increase of permeability, the price will further decline. Once again, the permeability will be further improved, and the growth trajectory of the industry in the next 2 to 3 years will be clear.
The sapphire manufacturing industry has high barriers and the leader Ored has benefited. The declaration of bankruptcy from GTAG shows that the barriers to sapphire production are high, which requires deep technical accumulation and R & D strength. Due to the high technology, equipment and management barriers in the industry, it is difficult for new entrants to master the relevant technology and produce low-cost sapphire wafers that can be applied on a large scale in a short time. The leading company Ored maximizes benefits from the development of the industry.
Ored technology leading the world, the acquisition of Singapore Airlines to open the industrial chain upstream and downstream, leading the development of the industry. Ored's current product pricing strategy and related financial indicators prove that Ored's technology is far higher than that of its competitors and its cost is the lowest in the world. Through the acquisition of Singapore Airlines, Ored laid out the upstream and downstream of the industrial chain in the growth furnace-wafer-wafer and processing links. Compared with traditional glass processing enterprises, Ored will be far ahead of competitors in the degree of upstream crystal growth and downstream processing automation, leading the development of the entire sapphire industry.
Cover for the first time, giving a "buy" rating. It is estimated that the annual income of the company in 2015-2017 is 13.2,37.5 and 4.77 billion yuan, the net profit is 2.9,8.0 and 1.02 billion yuan, and the earnings per share are 0.38,1.05 and 1.33 yuan. The current stock price corresponds to 99,36 and 28 times of PE in 2015-2017. Considering that Ored's homing net profit grew by 121.4%, 176.5% and 26.8% respectively in 2015-2017, the CAGR reached 98% in the past three years, the endogenous growth is strong, and the global sapphire is firmly in the leading position. It is conservatively valued at 0.5 times PEG in 2016, which corresponds to 50 times PE and a market capitalization of 40 billion yuan.