Performance summary: the company released its three-quarter report in 2018, with operating income of 2.334 billion yuan in the first three quarters, an increase of 24.75% over the same period last year, net profit of 497 million yuan, an increase of 33.85%, and a deduction of 277 million yuan in non-net profit, an increase of 25.14% over the same period last year. In the third quarter, the operating income in a single quarter was 713 million yuan, an increase of 5.03% over the same period last year, and the net profit was 184 million yuan, an increase of 18.24% over the same period last year. The deduction of non-net profit was 852.9 billion yuan, down 8.91% from the same period last year.
The downstream market of LED is highly prosperous. At present, the penetration rate of LED lighting has expanded to 40%, and it is expected that the market will further expand in the future; the compound growth rate of small spacing LED has been maintained at about 50% in recent years, and there is still room for growth; automobile and landscape lighting is still an important downstream market for LED; the rise of mini LED and micro LED is an important area for the future development of LED. Mini LED already has production process, micro LED is the focus of most manufacturers' research and development, and it is expected that there is huge room for development in emerging fields in the future. The company's LEDFlash chip products have successfully entered the main supply chain of the top ten packaging factories in the world, and have also entered the mainstream mobile phone factory supply chain; as the reliability of Huacan flip is gradually tested and recognized by the market, it is expected that the company's LEDFlash chips will continue to usher in shipping growth and enter more main customer supply chain in 2019. In addition, in the small batch production of infrared LED chips, the company is actively deploying laser and deep ultraviolet research and development.
Merger and acquisition of Meixin to develop new areas of MEMS. Meixin is the only domestic company with gauge-level accelerometer and geomagnetic sensor chips. its automotive sensors have entered GM, Mazda and other international automobile manufacturers, and have long been supplied in large quantities with cooperative manufacturers. This acquisition will enable the company to further expand its business areas in the integrated circuit industry, help the company achieve diversified and epitaxial development of related business, and then strengthen the company's strategic layout in application fields such as consumer electronics and automotive electronics.
Profit forecast and rating. According to the results of the first three quarters, we expect the company's EPS from 2018 to 2020 to be 0.87,1.11,1.35 yuan, corresponding to the previous share price of 10-8-7 times PE, maintaining a "buy" rating.
Risk hint: LED industry boom may not meet expectations; sapphire substrate business growth may not meet expectations; Meixin performance may not meet expectations.