Specializing in the field of high thermal conductivity graphite heat dissipation materials, has become the mainstream supplier of Android camp. The company is currently the main supplier of graphite heat dissipation materials for Samsung, Huawei, VIVO, OPPO and other terminal brands. The company's graphite film products have been widely used in the flagship models of the above customers, such as Samsung (NOTE 9/S9/A9), Huawei (P20/MATE 20), OPPO (R17), VIVO (X21/NEX) and so on. In the future, carbon technology will rely on existing customers and continue to take heat dissipation materials as the main development direction.
At present, the main product of the company is graphite film, which focuses on the main business of consumer electronics heat dissipation. The company's 2018 business is divided into two parts: consumer electronics and smart home. Among them, the company's consumer electronics business income in 2018 was 509 million yuan, accounting for 93.5% of the total income. The main products are high thermal conductivity graphite film, which is divided into single-layer high thermal conductivity film, composite high thermal conductivity film and multi-layer high thermal conductivity film. The revenue of the three types of products in 2018 was 271 million, 24.595 million and 212 million yuan respectively. Among them, the gross profit margin of single-layer and double-layer graphite film is higher, 26.00% and 26.63% respectively; the gross profit margin of multi-layer graphite film continues to climb, and the gross profit margin of 2018 increased by 5.54 pct compared with the same period last year, reaching 19.64%. Graphite film business as a whole maintained a steady growth trend.
Graphene, heat pipe and VC infiltrated into 5G smart phones, and the stand-alone heat dissipation ASP was significantly improved: traditional phone heat dissipation materials are mainly TIM materials such as graphite sheet and heat conduction gel (heat conduction interface material). At present, heat pipe and VC (soaking board) begin to infiltrate into smart phone terminals from computers, servers and other fields.
The 5G intelligent terminal is expected to popularize the heat dissipation scheme of graphite film + heat pipe or graphite film + VC. Huawei's Mate 20X is the first to use graphene + VC heat dissipation, and Samsung's new flagship Note 10 also uses VC heat dissipation for the first time. With the increase in the penetration of heat pipes and VC in smartphones, the stand-alone heat dissipation ASP in the 5G era is expected to reach more than $3 to $4, a triple increase in value. In the next few years, we expect 5G to usher in a new replacement wave: according to IDC, the smartphone industry is expected to return to growth in the second half of 2019, with global smartphone shipments of 1.542 billion units and 5G phone penetration of 25 per cent by 2023.
Taiwan manufacturers have a first-mover advantage in heat pipe and VC solutions, while mainland manufacturers are expected to catch up. Taiwanese companies, including Chaozhong, Shuanghong, Taishuo, Qihong, Lizhi and Jianshi, have strong technical strength in the heat pipe field, and VC soaking plates occupy 70 per cent of the global market share. However, in the brand-new field of mobile phone terminals, the new technological requirements give mainland manufacturers the opportunity to catch up. Carbon technology has won the trust of Samsung, Huawei, VIVO, OPPO and so on in the era of graphite film. In 2018, the company invested in the establishment of Changzhou carbon thermal conductivity, mainly providing complete terminal heat dissipation solutions including high thermal conductivity graphite, ultra-thin heat pipe and VC. The company's heat pipe plant (ultra-thin heat pipe and VC board) was completed and put into production in the second quarter of 2019, which is expected to benefit from the increase in the permeability of 5G heat pipe / VC heat dissipation products.
Investment suggestion: we estimate that the company's income from 2019 to 2021 will be 650 million yuan (+ 17.9%), 1.12 billion yuan (+ 71.6%) and 1.52 billion yuan (+ 33.3%) respectively, and the net profit attributed to the shareholders of the listed company is 60 million yuan (+ 13.4%), 150 million yuan (+ 147.5%) and 240 million yuan (+ 59.00%), respectively, and the corresponding EPS is 0.29,0.72,1.14 yuan respectively. The corresponding PE was 74 times, 30 times and 19 times, respectively. Combined with the company's future development expectations driven by 5G, we give carbon technology a reasonable valuation of 35 times the dynamic PE in 2020, with a 6-month target price of 25.1 yuan, covering for the first time and giving a "buy-A" investment rating.
Risk hint: the international trade environment has changed greatly. At present, 5G mobile phones have not yet reached the stage of large-scale application, and the upstream industrial chain of the company is at risk of being replaced by technology.