Incidents:
The company released its 2023 three-quarter report. In the first three quarters, it achieved operating income of 2,391 billion yuan, a year-on-year increase of -10.64%, and net profit of -018 million yuan, a year-on-year increase of -107.48%. 23Q3 achieved revenue of 808 million yuan in a single quarter, an increase of -7.82% over the previous year, and net profit of 27 million yuan.
Short-term performance is under pressure, and overseas market layout continues to be strengthened:
According to data from the Passenger Transport Federation, China is expected to have 8.5 million new energy passenger vehicles in 2023, and the penetration rate is expected to reach 36.3%. Demand for automotive electronics products such as smart cockpits, ADAS, and battery management systems continues to grow, and so does the demand and value of PCBs. In the first three quarters of 2023, the company continued to increase its development efforts in the automotive electronics market. The revenue scale of automotive electronics products increased significantly year-on-year. The share of automotive electronics products increased to 18% from 11% in the same period last year, while increasing investment in automotive lines to seize the growing demand for automotive PCB orders. The company continues to strengthen in-depth cooperation with internationally renowned enterprises, strengthen overseas marketing service network layout, and continuously explore product applications in downstream fields. In the first three quarters of 23 years, the company's PCB product export revenue was 1.1 billion yuan, and the share of export sales increased sharply to 48% from 40% in the same period last year. The company disclosed that in the future, it will continue to strengthen its overseas service network, focus on market expansion in Japan, South Korea, Europe, and the US, and develop key customers, and accelerate the improvement of overseas layout.
Keep up with market trends and continuously invest in technology research and development:
The semi-annual report revealed that after more than 30 years of R&D investment and technology accumulation, the company has outstanding scientific and technological innovation capabilities. It has mastered micro-hole partial insulation technology, N+N double-sided blind pressure technology, multi-layer PCB graphic Z alignment technology, high-speed signal loss control technology, high-speed high-frequency copper clad plate processing technology, 100G to 400G high-speed optical module printed circuit board manufacturing technology, and smart city core giant router circuit board technology. The total investment scale for 5G high-frequency high-speed materials research is expected to reach about 46 million yuan, while adding 400G and above high-end Research on new projects such as optical module PCB development, PCB development for vehicle-mounted millimeter wave radar, process development for nRNF-NR special mechanisms, and high-reliability PCB development for EGS servers, etc., fully connect with rapidly growing fields such as 5G wireless communication, smart car electronics, consumer electronics, new energy, and high-end servers. The semi-annual report revealed that the company's 112G PCB products are expected to achieve mass production in 2023, mainly for high-speed switches, router products and high-speed optical module products. At the same time, as the AI server market is expected to grow by 38.4% year-on-year, the company actively cooperates with end customers in AI server product development work. Currently, it has successfully produced a variety of PCBs for AI server products, and some projects have already entered mass production, which is expected to achieve revenue breakthroughs.
Investment suggestions: We expect the company's revenue from 2023 to 2025 to be 3.393 billion yuan, 4.04 billion yuan and 4.805 billion yuan respectively, net profit of 81 million yuan, 222 million yuan and 366 million yuan respectively, and net profit growth rates of -74.0%, 172.5% and 64.9% respectively, giving 48 times PE in 2024, corresponding to the target price of 12.8 yuan, maintaining a “buy-A” investment rating.
Risk warning: Industry sentiment falls short of expectations; product development falls short of expectations; market development falls short of expectations.