Events:
On April 27, the company released a report for the first quarter of 2020, which showed that during the reporting period, the operating income was 112 million yuan, down 47.84% from the same period last year, and the net profit was 6 million yuan, down 82.57% from the same period last year. The net cash flow generated by operating activities was 35 million yuan, compared with-31 million yuan in the same period last year.
Comments:
COVID-19 's epidemic spread and demand was under pressure, and his performance dropped sharply in the first quarter.
The company's performance declined sharply during the reporting period, and its net profit fell 82.57% to 6 million yuan compared with the same period last year, mainly due to the pressure on domestic demand caused by the new crown epidemic. During the epidemic, a large number of enterprises stopped production and consumers were isolated at home, while the downstream areas of the company's products covered consumer electronics, automotive electronics, communication equipment and other social and economic fields. the diversified and decentralized market demand makes the company's business sales greatly affected by the downstream demand.
The low-cost advantage shapes the industry leader, and the systematic advantage shows the company's core competitiveness.
The company's main fine chemicals research and development and sales, affected by the epidemic, during the reporting period, the company's operating costs and operating income fell sharply compared with the same period last year, but the company has a significant cost advantage as a leader in the industry. superimposed on the acquisition of Hunan Sunshine and Dongguan Hangsheng in 2019, the synergy effect of the company's industrial chain began to appear, and operating costs always remained at a low level in the industry. With the advantage of low cost, the gross profit margin of comprehensive products reached 37.3% in the first quarter, an increase of 1.48 percentage points over the same period last year.
During the epidemic, the company increased its efforts to recover accounts receivable, resulting in an increase in cash flow generated by sales income, with net cash flow from operating activities of 35 million yuan, compared with a net outflow of 31 million yuan in the same period last year. This makes the company have sufficient cash flow to cope with the impact of the new coronapneumonia epidemic.
Enter UV printing iron ink, ink business layout is further improved
During the reporting period, the subsidiary Jiangyin Guangqing was established and merged in March this year, marking the formal start of the substantive business operation of UV printing iron ink. As a substitute for traditional solvent-based environmental protection products, UV iron printing ink has the advantages of fast curing speed, strong adhesion, environmental protection, high efficiency, energy saving and so on. it is mainly used in food packaging, electronic product protective film and other fields. under the background of normal environmental protection, UV iron printing ink is expected to become a new performance growth point of the company.
From the product structure point of view, the introduction of UV printing iron ink series products makes the company ink business structure optimized and adjusted, from the production capacity point of view, the company 80 million tons of ink project has been completed, and has passed the relevant departments of the boiler and fire acceptance, the company as a domestic ink business leader position will be further consolidated, significant systematic advantages.
The 5G industrial chain is booming, and the company's business may usher in rapid growth.
The company's main business as a part of the 5G industry chain will benefit from the vigorous development of 5G "new infrastructure". Although the construction of 5G base stations in China has stagnated due to the influence of novel coronavirus at the beginning of the year, the domestic epidemic situation has been basically brought under control, and the large-scale construction of 5G base stations delayed by the epidemic has been put on the agenda again.
5G "new infrastructure" will promote the development of the PCB industry, and then promote the growth of the company's PCB photosensitive ink business. The company's 5G communication Low Dk/Df special ink project is also in the stage of promotion and trial production. As an important supporting electronic chemical in the 5G industry chain, this product has a good application prospect. In terms of coatings, Jiangsu Hongtai, a subsidiary of Jiangsu Hongtai, as the main supplier of special coatings for consumer electronics in China, the replacement wave of 5G mobile phones will also drive the market demand for the company's paint business.
The photoresist project is progressing steadily, and the company can make a profit in the future.
At the end of 2018, the company signed a "Technology entrustment Development contract" with the Chinese Taiwan enterprise Yuanzhi New Materials to research and develop the technology project of "UV positive photoresist for printed circuit board flexible substrate". The development project can be applied to high resolution UV positive photoresist in the fields of printed circuit board flexible substrate, LCD and LED display panel, semiconductor components and so on. The first batch of products of the project has achieved research and development results, and began to start technology transfer and the second batch of product research and development work. The R & D and sales of photoresist expand the company's business field, enrich the company's product line, establish a systematic advantage for the company, and consolidate its leading position.
Earnings forecast, valuation and rating
Taking into account the spread of the COVID-19 epidemic and the slowdown in global economic growth, we lowered the company's profit forecast for 2020-2021 and added the 2022 profit forecast. It is estimated that the company's net profit in 2020-2022 will be 0.88 billion yuan, and the corresponding EPS will be 0.42 trillion 0.51 and 0.61 yuan respectively. The epidemic affects the company's short-term performance, but does not affect the company's long-term competitiveness, so we maintain the company's "overweight" rating.
Risk hints: the risk of raw material price fluctuation, the risk of new product development, and the risk of bad debts in accounts receivable.