Event: the company issued a performance forecast for 2022 on January 19, which is expected to achieve a net profit of RMB 0.66-96 million belonging to the owner of the parent company in 2022, an increase of 7.91% RMB56.97% over the same period last year; net profit of RMB 0.46-69 million after deducting non-recurring profits and losses, an increase of 13.16% RMB69.74% over the same period last year.
The production capacity of Line 7 has been expanded and the profitability has been improved: in 2022, the company's net profit belonging to the owner of the parent company is expected to increase by 35 million yuan over 2021, with steady growth. Q4 in 2022, the company's net profit attributable to the owner of the parent company is expected to be 0.09-39 million yuan, a substantial turnround compared with the same period last year. The company's profitability improved in 2022, mainly due to: first, the release of production capacity of the company's oversized TV polarizer industrialization project (Line 7), which contributed to the growth of polarizer business performance; second, the company continues to optimize product structure, improve product quality, improve production line farming rate, carry out fine management to reduce costs and increase efficiency, and further improve the overall profitability of the company.
The new production line climbing mass production to enhance endogenous profits, the acquisition of Hengmei to consolidate the leading position in the industry: the company's main business is polarizer research and development, production and sales, is the domestic polarizer industry leader. Since 2022, the company has made every effort to promote the project construction and slope climbing production of Line 7, optimizing and improving the quality, technology and equipment of Line 7, greatly improving the product yield level, and gradually reducing the unit consumption of membrane materials and chemicals used in production. With the gradual release of new capacity, the company's profitability is expected to further improve. In addition, at the end of 2022, the company issued a fixed increase plan to acquire a 100% stake in Hengmei Optoelectronics, a peer company, and continue to increase the polarizer layout. After the completion of the merger and acquisition, it is expected to bring greater economies of scale to the company, further improve the layout of the company's industrial chain, and strengthen the company's leading position in the polarizer industry.
Domestic space is still promising, benefiting from a recovery in panel industry demand: according to CINNO Research's Quarterly Analysis of the Global Polarizer Market, global polarizer shipments in 2021 covered an area of about 610 million square meters, an increase of about 5 per cent over the same period last year. At the same time, the global market for panel polarizers reached US $10.2 billion in 2021, an increase of 6% over the same period last year and surpassing US $10 billion for the first time. Polarizer is mainly used in LCD panels, the global economic recovery is expected to pull the demand of the LCD panel industry to pick up, thus driving the polarizer industry upwards. Due to the high threshold of polarizer technology, the production capacity of polarizer before 2021 is mainly distributed in Japan and South Korea, and the market is mainly monopolized by LG Chemical, Nitto Electric, Sumitomo Chemical, SDI and other major manufacturers. The four companies accounted for nearly 78 per cent of the global market share in 2019, according to AVC. However, with the continuous technology accumulation and gradual development of Chinese mainland manufacturers, the production capacity continues to climb, and the market share increases rapidly, exceeding 15% by the end of 2020, and the market concentration of Japanese and Korean manufacturers has decreased. According to Omdia data, the top five polarizer manufacturers in the first half of 2022 are Nitto Electric, Sumitomo Chemical, Shanjin Optoelectronics, SDI and Hengmei Optoelectronics. With the progress of technological catch-up and the improvement of downstream customer recognition, the localization rate of polarizers is expected to further increase.
Maintain the "buy" rating: the company is one of the major domestic polarizer R & D, production and sales enterprises, and a leading company in the domestic polarizer industry. The acquisition of Hengmei Optoelectronics, a high-quality company in the same industry, is expected to show strong synergy. The global leading position is becoming more and more stable. Without considering the after-completion effect of fixed increase, it is estimated that the return net profit of the company from 2022 to 2024 is 70 million yuan, 116 million yuan and 154 million yuan, the EPS is 0.14,0.23,0.30 yuan, and the corresponding PE is 75x, 45x and 34x, respectively.
Risk tips: downstream display panel demand is lower than expected, foreign manufacturers enter the market leading to intensified competition in the industry, raw material price fluctuations, foreign exchange rate fluctuations.
