Matters:

On August 24, 2019, the company released its 2019 interim report. Total operating revenue was 8.371 billion yuan, up 8.94% from the same period last year; net profit attributable to shareholders of listed companies was 287 million yuan, an increase of 39.84% over the same period last year; profit per share was 0.14 yuan, up 0.04 yuan/share from the same period last year.

Comments:

The semiconductor business bucked the trend in the first half of the year, and the engineering business grew steadily

In the reporting period, the company's semiconductor business completed revenue of 2,126 million yuan, an increase of 9.42% over the previous year, accounting for 25.39% of the company's revenue; the total engineering contracting business completed revenue of 5.125 billion yuan, an increase of 13.02% over the previous year, accounting for 61.22% of the company's revenue; the design and consulting business completed operating income of 856 million yuan, accounting for 10.23% of the company's revenue; the completed revenue of the photovoltaic power generation business was 183 million yuan, an increase of 16.85% over the previous year, accounting for 2.19% of the company's operating income.

In the first half of 2019, the company completed operating income of 8.371 billion yuan, an increase of 8.94% over the previous year; net profit attributable to shareholders of listed companies was 287 million yuan, an increase of 39.84% over the previous year.

Consolidated gross margin rose slightly, and Q2 performance increased steadily

The company's comprehensive gross margin during the reporting period was 12.09%, compared to 11.39% in the same period last year, an increase of 0.7 percentage points. The company's second-quarter results achieved steady growth. Q2 achieved revenue of 4,563 billion yuan, up 19.85% from 3.808 billion yuan in the first quarter, and revenue of 4.141 billion yuan in the same period last year, up 10.20% year on year. At the same time, the company achieved net profit of 191 million yuan in the second quarter, up 98.71% from 95.99 million yuan in the first quarter, up 98.71% from 125 million yuan in the same period last year, up 52.12% year on year;

Further lay out the semiconductor business to achieve a contrarian rise in the semiconductor business

In the first half of 2019, the company invested 200 million yuan (9.48% of shares) to participate in the establishment of Wuxi Xisan Microchip Semiconductor Co., Ltd. to further optimize the company's semiconductor business layout. At the same time, in the first half of the year, Haitai Semiconductor eliminated old equipment, enhanced production capacity for high-end products, and expanded production capacity. Based on the 1Gb benchmark, from January to June, package production was 6.31 billion pieces, up 4.5% year on year; package test production was 5.83 billion pieces, up 1.4% year on year; module manufacturing output was 272 million pieces, down 6.5% year on year; module test production was 350 million pieces, up 11.8% year on year. The production of inverted chips representing advanced packaging technology in January-June already accounted for 62% of total production, and advanced 16-nm products accounted for 41% of all inverted chip products. At the same time, in the face of the Sino-US trade war and the global memory decline cycle, Taiji Semiconductor's sales of the top three customers are still basically the same as the same period last year. The company is also actively expanding cooperation with second-tier order customers to ensure the stability of the company's orders.

The cost rate remained stable during the period

During the reporting period, the company's expenses rate was 6.80% (+0.04pct), which remained stable. Among them, the sales expenses rate was 0.24%, a decrease of 0.1 percentage points; the management expenses rate was 5.37%, an increase of 0.19 percentage points; and the financial expenses rate was 1.19%, a decrease of 0.05 percentage points. It shows the company's good level of expense rate control. The company's net cash flow from operating activities during the reporting period was -365 million yuan.

Give a “buy” rating

We expect the company's revenue from 2019 to 2021 to be 18.67 billion yuan, 20.06 billion yuan and 15.69 billion yuan respectively, up 19.3%, 18.2% and 16.5% respectively; the net profit of the mother was 783 million yuan, 944 million yuan and 1,119 million yuan respectively, up 36.7%, 20.5% and 18.6% respectively over the previous year. EPS from 2019 to 2021 is expected to be 0.37 yuan/share, 0.45 yuan/share, and 0.53 yuan/share, respectively. The corresponding PE is 19/15/13x respectively. The company is a rare listed high-tech engineering company, and has strong competitiveness in the fields of semiconductors, logistics, and photovoltaic engineering. It is expected that it will benefit from domestic industrial upgrading in the future and be given a “buy” rating.

Risk warning

Project quality and safety risks; receivables bad debt risks; PV market policy risks.