Traditional main business: CNAC is one of the three qualified suppliers of high-performance aluminum alloy materials for special equipment for nuclear fuel processing in China. The products provide high-performance (high-strength, high-toughness, corrosion-resistant) aluminum alloy materials and machined parts for special nuclear fuel processing equipment, and are qualified suppliers of CNNC. In order to cope with the impact of fluctuations in the market demand for nuclear products, the company has implemented to expand supply to the military and civilian fields; benefiting from the restart of nuclear power, the traditional nuclear power materials-related business is expected to usher in a reversal of performance.
Gorgeous transformation: at present, Zhu Shihui, the chairman of the leading rarewood board, has become the actual controller of Zhongfei shares. Lead rare Materials is a global rare metal materials technology group, an important manufacturer of selenium and tellurium products worldwide, as well as a major supplier of gallium, indium, germanium, bismuth, cadmium and cobalt products in the global market. In 2018, the revenue and net profit of pilot rarewood were 4.239 billion yuan and 336 million yuan respectively. The pilot rarefied material has four business divisions: infrared laser, compound semiconductors, thin film materials and functional materials. At present, the infrared laser business is already in the body of Zhongfei Corporation. We expect that there will be asset injection expectations for the thin film materials and compound semiconductor materials of the pilot rarefied materials in the future.
Endogenous: infrared laser business is successfully introduced, providing rapid endogenous growth. The company plans to invest 2 billion yuan in the industrialization project of infrared optics and laser devices, which can break the technical blockade of foreign countries and realize the localization of high-end precision infrared optics and laser devices. Short-term: infrared optics and laser devices are high-tech products with high added value, which can promote the company's performance growth, long-term: conducive to the company's extension to the downstream industrial chain, to achieve large-scale production capacity of the whole industry chain from materials to devices and then to subsystem modules.
Epitaxy: there are injection expectations for assets such as thin film materials and compound semiconductor materials for pilot rarefied materials. Among them, thin film materials: the leading manufacturer of sputtering targets, mainly engaged in the production and development of ITO targets, solar targets, magnetic storage targets, semiconductor targets, precision optical coating materials and related materials, among which ITO targets make up for the production gap of high-end ITO targets needed for LCD panels in our country. Compound semiconductors: one of the leading suppliers in the world semiconductor market, including III-V compound semiconductor substrates (GaAs, InP), Ge semiconductor substrates, semiconductor laser chips, metal organic sources, specialty gases, PBN ceramics and high purity metals and other microelectronic and optoelectronic applications.
Investment suggestion: Zhu Shihui, the real controller of the pilot rarewood, will become the real controller of the China Aviation Corporation. The four major divisions of the pilot rarewood are infrared laser, compound semiconductors, thin film materials and functional materials. The infrared laser business has been injected into the China Aviation Corporation. We expect that there is also the expectation of asset injection into listed companies in other business of the pilot rarewood. According to the company's performance, KuaiBao, Zhongfei shares achieved a net profit of-112 million yuan in 2019, and we expect the net profit of 2020 to 2021 to be 1.04 yuan and 251 million yuan, corresponding to PE of 34X and 14x respectively, with a "buy" rating for the first time.
Risk hint: the progress of the fund-raising project is not as expected; the capital operation is not as expected.