Main points of investment:
The domestic diamond line is of high quality and fully benefits from the technical innovation of the industry. The company is a local enterprise that mastered the related technology of diamond line through independent research and development and successfully industrialized, and its market share ranks among the top three in the industry; the company's business plate covers two kinds of diamond tools: electroplated diamond line and diamond grinding wheel. Downstream customers include Jiangsu Xiexin, Longji shares, Orede, Ningbo Yunsheng and other well-known photovoltaic, sapphire, magnetic materials, integrated circuit processing enterprises. Under the background of downstream customers updating and upgrading the new generation cutting technology, the company's performance has achieved rapid growth, with revenue of 284 million yuan in 2017, an increase of 82.16% over the same period last year, and a net profit of 87 million yuan, an increase of 128.57% over the same period last year.
WEDM application speed up + production capacity expansion, electroplated diamond line performance is expected to continue to grow. In the field of photovoltaic crystal silicon slices, WEDM is replacing traditional WEDM with high cutting speed and low consumption materials. It is estimated that the permeability of WEDM will exceed 90% in the new photovoltaic production capacity in 2018. Corresponding to the demand of 35 billion meters, the market space is expected to reach 4.9 billion yuan. The company is one of the few domestic enterprises with large-scale supply capacity, with the gradual landing of IPO investment projects, the company's production capacity will achieve rapid expansion; the company's electroplated rigid line production capacity of 460 million meters in 2016, and by the end of December 2017, the company's electroplated diamond line production capacity has been close to 300 million meters / month, corresponding to an annualized production capacity of 3.6 billion meters / year, a year-on-year increase of nearly 7 times, in this context, the company's performance is expected to maintain rapid growth.
The downstream application field is constantly expanding, and the grinding wheel business is expected to maintain steady growth. Diamond grinding wheel is a circular consolidated diamond tool with through holes in the center, which is widely used in downstream industries and has a high degree of market dispersion. since its establishment in 1999, the company has been engaged in the research and development, production and sales of diamond grinding wheels. the main downstream industry is the magnetic material industry, which has established a long-term and stable business relationship with more than 200 magnetic material industry manufacturers. In 2016, the magnetic material industry accounted for 33.84% of the company's grinding wheel industry. On the other hand, the company promotes the R & D and production of diamond grinding wheels for integrated circuits through independent research and technical cooperation, and has established a good cooperative relationship with Wuxi China Resources Huajing Microelectronics Co., Ltd., and other well-known enterprises in the integrated circuit industry. Driven by the improvement of the prosperity of the downstream industry and the widening of the application field of the company's products, the company's grinding wheel business is expected to maintain steady growth.
For the first time, the company was given an "overweight" rating. It is estimated that the return net profit of the company in 2017-19 is 0.87,1.11 and 143 million yuan, respectively, and the corresponding EPS is 1.67,2.14,2.74 yuan per share. According to the latest closing price of 81.32yuan, the corresponding PE is 49,38,30 times respectively. We believe that the application of WEDM in the photovoltaic field is the general trend. At present, the company has formed a certain first-mover advantage over domestic enterprises, and its future performance is expected to grow rapidly. For the first time, it will cover and give the company an "overweight" rating.
Risk hint: the new installed capacity of photovoltaic is not as expected; the application of diamond wire cutting technology is not as expected; the business of diamond grinding wheel is not as expected; the company's fund-raising project is not as expected; the company's King Kong is not as expected.