Events:
On the evening of October 27, 2020, the company released its quarterly report for 2020, and its performance was in line with expectations.
In the first three quarters of 2020, the company achieved revenue of 1.69 billion yuan, down 8.62% from the same period last year; net profit from home was 231 million yuan, down 9.2% from the same period last year; and 214 million yuan was deducted from non-net profit, down 5.73% from the same period last year.
Of this total, Q3's revenue in a single quarter was 690 million yuan, down 1.88% from the same period last year, and its net profit was 88 million yuan, down 18.39% from the same period last year. Non-net profit was 88 million yuan, down 10.2% from the same period last year.
Revenue decline narrowed compared with the same period last year, and various businesses gradually recovered.
Q3's revenue in a single quarter totaled 690 million yuan, down 1.88% from the same period last year and 12.75% compared with the China report. The revenue decline in the first three quarters further narrowed to 8.62%, indicating that the company's businesses are gradually recovering. The China News revealed that the revenue of the automotive lighting business is growing at a high speed against the trend and has successfully entered the supply chain systems such as Chery, BYD and Jianghuai. The sales volume of the automobile industry has appeared at the Q3 inflection point, and the sales of new energy vehicles are growing rapidly. We believe that the automotive lighting business has brought new increments to the company.
Gross profit margin drops slightly, financial expenses affect net profit
Affected by the epidemic, downstream terminal manufacturers reduced costs, price pressure, the company improved operating capacity, the first three quarters gross profit margin of 28.76%, gross profit margin remained stable compared with the same period last year, the performance is in line with expectations. Q3's net profit in a single quarter was 88 million yuan, down 18.39% from the same period last year, deducting 88 million yuan from non-net profit, down 10.2% from the same period last year, mainly due to the company's calculation of interest expenses and exchange losses on convertible bonds, excluding financial expenses. The company's Q3 deduction non-net profit increased by about 12% compared with the same period last year. As the impact of the epidemic weakens in the second half of the year, downstream demand picks up, capacity utilization gradually picks up. The company's business lines are expected to usher in performance repair.
Terminal products are about to appear, MiniLED backlight is coming from the market, Apple Inc iMac and iPad with MiniLED backlight are about to appear, the first product may be listed in the fourth quarter of this year; other manufacturers also accelerate the launch of MiniLED backlight products, MiniLED is expected to enter large-scale commercial use. We estimate that the global output value of Mini LED applications in 2021 and 2022 will reach 659.75 billion yuan respectively, of which the output value of the packaging industry will reach 13.2 billion yuan in two years. As a small-size backlight faucet, the company has an early layout in Mini LED and is ready for mass production, which is expected to fully benefit from the outbreak of Mini LED backlight applications.
Investment suggestion
We estimate that from 2020 to 2022, the company's operating income will be 2.2793 million yuan, the net profit will be 2.97 million yuan, and the net profit will be 456 million yuan, 0.36 yuan and 21.6518.20 times for EPS 0.23 and PE respectively. Maintain the company's "buy" rating.
Risk hint
The penetration of Mini LED was not as expected; the impact of the epidemic exceeded expectations; the demand for consumer electronics such as mobile phones, televisions and PC was sluggish; and the competition in the LED packaging industry intensified.