Company Overview: Server PCB leader, rich in core technology. Guanghe Technology is mainly engaged in the R&D, production and sales of PCBs. Product types can be divided into single and double panels, four/six layer boards, and eight or more layer PCB boards. The company has high product accuracy, reliability and density requirements, and is mainly positioned in the middle and high-end application markets. Downstream applications include servers, communications, consumer electronics, automotive electronics, security electronics, industrial control, etc. The company's revenue grew steadily, from 1,334 billion yuan in 2019 to 2,412 billion yuan in 2022, with a compound annual growth rate of 21.83%. The company's profit continued to grow, achieving net profit of 115 million yuan, 120 million yuan, 76 million yuan, and 280 million yuan respectively in 2019-2022, with a CAGR of 34.58%.
Industry analysis: The PCB industry chain is shifting to China, and market segments drive steady growth. The global PCB industry is mainly distributed in China, Japan, South Korea, Europe and America, and the global PCB industry's output value reached US$80.9 billion in 2021. The global printed circuit board industry is not concentrated, there are many manufacturers, and market competition is sufficient. Currently, China is already the region with the largest output of the global PCB industry. The output value of the PCB industry in mainland China increased from US$262 billion in 2014 to US$44.2 billion in 2021, reaching a year-on-year increase of 25.93% in 2021. As the transfer of the PCB industry deepens, the share of China's PCB output value is expected to increase further. Since 2019, demand for market segments represented by 5G communications and terminals, new energy vehicles, and AI servers has increased dramatically. The PCB industry has continued to show new growth points, and the PCB industry is expected to maintain steady low-single-digit growth in the future.
Company analysis: Mainly in the server field, with high-quality customer resources. The company's PCB product layout is “cloud, tube, end”, mainly high-speed multi-layer precision products for cloud computing-related servers. In 2022, we achieved server PCB board revenue of 1,635 billion yuan, accounting for 71.98% of revenue. The company is actively expanding downstream customers. The products have entered well-known domestic and foreign server manufacturers such as Dell and Inspur Information and EMS companies, and cooperated with server manufacturers such as Lenovo and Huawei to develop new products. The company continues to increase investment in R&D, with a CAGR of 24.04% of R&D expenses in 2020-2022.
In the medium to long term, along with the commissioning of the fund-raising project Huangshi Guanghe, it will add more than 1 million square meters of high-rise precision circuit board production capacity. Downstream demand for superimposed servers grows with the AI wave, and the company has sufficient potential for development.
Reasonable valuation range: The company's fair value range for the next 6 months is 6440-6.890 billion yuan. The company's net profit for 2023-2025 is estimated to be 415 million yuan, 491 million yuan, and 572 million yuan respectively, up 48.7%, 18.2%, and 16.3% year-on-year. Considering the company's product technology advantages and future growth trends, combined with comparable company data, and comprehensively considering relative valuation and absolute valuation, we believe that the reasonable market value of the company after the IPO was issued is in the range of 64.40-6.890 billion yuan, corresponding to a reasonable value range of 15.25-16.32 yuan/share per share. Assuming that no over-allotment option is used, based on the 2022 audited net profit of 280 million yuan, the corresponding PE range is 23-25 times; based on the 2022 audited net profit of 280 million yuan, the corresponding PE range is 23-25 times; based on the 2023 forecast net profit of 415 million yuan, the corresponding PE range is 16-17 times.
Risk warning: Risk of changes in profit forecasts and valuation analysis due to changes in key assumptions, risk of fluctuations in gross margin, risk of macroeconomic and downstream market demand fluctuations, risk of increased market competition, risk of fluctuations in secondary market prices, risk of trade friction risk, risk of PCB industry integration risk, risk of loss of core technical personnel, risk of concentration in downstream application areas, risk of customer concentration, risk of loss in the early stages of new project commissioning, etc.