Key points of investment
The company is the largest medium temperature hard solder development and manufacturer in China. The company's main products are copper-based solders and silver solders, which are mainly concentrated in the field of medium temperature hard solders. By the end of 2019, the company had a production capacity of 6,000 tons of main products (copper-based solder and silver solder), with an output of 4838.52 tons. Based on the scale of domestic hard solder production, the company's market share was about 14.19%; based on the scale of domestic solder production, the company's market share was about 2.68%.
The upgrading of air conditioners and refrigerators has become a new growth point in overseas markets, and demand in diversified markets is growing steadily. 1) Air conditioners and refrigerators are one of the most important demand markets for soldering materials. Focus on the sustainability of domestic real estate completion improvements and the recovery in exports. 2) The known scale of solder used in the motor industry is relatively small, but its solder is mainly silver solder, and the product is highly profitable. 3) As China accelerates the construction process of power infrastructure, vacuum switch tubes, as essential components in transmission equipment, are expected to maintain steady growth. 4) The company has entered the microwave oven magnetron industry, and downstream fields such as HVAC equipment, automobiles, hard metals, and aerospace are also gradually expanding.
Fundraising projects are used to expand production capacity and optimize products. The company raised a total of 356 million yuan, which was used for the construction project for intelligent manufacturing of new green brazing materials with an annual output of 4,000 tons (178.6 million yuan), the construction project of a new connecting material and process R&D center (55.53 million yuan), the technical transformation project of the existing brazing material production line (41.39 million yuan), and supplementary working capital. After the fundraising project is put into operation, the company's production capacity will be expanded from 6,000 tons to 10,000 tons. At the same time, product optimization will enhance the company's competitiveness.
Profit forecasts and ratings: Considering the impact of public health events in the first quarter and the gradual commissioning of fund-raising projects, we expect the company's net profit to be 55 million yuan, 97 million yuan and 171 million yuan respectively in 2020-2022, while EPS will be 0.63, 1.10, and 1.95 yuan respectively. The first coverage gave the company a “prudent increase in holdings” rating.
Risk warning: risk of price fluctuations of raw materials and products; risk of technological change and product iteration; risk of changes in downstream demand; risks such as the construction and commissioning of fund-raising projects falling short of expectations