Incident: The company released its 2019 annual performance forecast. The net profit attributable to shareholders of listed companies from January to December 2019 is estimated to be about 118 million yuan to 137 million yuan, an increase of about 25%-45% over the previous year.
Comment: The company's net profit attributable to shareholders of listed companies from January to December 2019 was about 118 million yuan to 137 million yuan, far exceeding expectations. Benefiting from the high level of prosperity in downstream biomedical, communications, industrial science, consumer electronics and other application markets, the company's MEMS business, which has a global competitive advantage, grew beyond expectations in 19Q4 and continued to maintain strong profitability. In the future, the company will continue to be driven by demand from domestic downstream enterprises, and we expect the company's MEMS business to continue to grow in the future.
Production capacity is king. The Beijing production line will be put into operation this year, opening up a new space for growth. Beijing's “8-inch MEMS International Foundry Line Construction Project” will be put into operation in 2020 and will reach a stable period six years later. The current plan is to achieve a production capacity of 10,000 tablets per month. It is estimated that revenue will increase by 7-800 million after delivery, and production capacity of 30,000 tablets per month is expected to be achieved in the future. Domestic downstream enterprises are in strong demand, and Nivey Technology will soon increase production capacity significantly, which has great profit flexibility.
The policy continues to support the semiconductor industry chain, and Nivea Technology seizes development opportunities. The National Integrated Circuit Fund has subscribed more than 1.2 billion dollars to invest in the “8-inch MEMS International Foundry Line Construction Project”. The “8-inch MEMS production line” is one of the important tasks in the implementation of the national integrated circuit development plan. It is a strategic emerging industry promoted by the country. The future development of the company's MEMS business will continue to be supported by policies.
The rapid growth trend of the domestic MEMS industry remains unchanged, and the company seizes the opportunity to explore the market. According to CCID statistics, in 2018, China's MEMS sensor market reached 50.43 billion yuan, making it a region where the global MEMS market is developing relatively rapidly. As the hardware innovation market has gradually moved domestically in recent years, the growth rate of demand for MEMS devices in the Chinese market is far higher than the growth rate of the global MEMS market. Nivea Technology seizes market opportunities, accelerates development around its core business, MEMS, and increases investment in R&D.
On January 10, it was announced that the company's wholly-owned subsidiary intends to acquire 97.81% of Swedish C.N.S.Systems AB's shares in cash. C.N.S.Systems AB is a professional communication, navigation and surveillance system solution provider. Its software and hardware products and services are widely used in aviation and marine operations around the world.
As of September 30, 2019, revenue was 100.7 million yuan\ net profit of 255.79 million yuan. At present, the global satellite internet has begun to be closely built, and Spacex's Starlink constellation plan alone has 12000+30,000 launch plans (according to Arstechnica). According to China.com, the deployment of China's Beidou-3 navigation system was completed on December 17, 2019, and global networking was completed in 2020. We believe that the company's acquisition of C.N.S.Systems AB is an important step in welcoming the blue ocean satellite application industry.
Investment suggestions: The company's multiple production lines are upgraded/put into operation. After production capacity is put into operation, it is expected that production capacity will be rapidly absorbed. In the future, demand will be diversified downstream of the sensor circuit, demand will rise rapidly. The company will benefit fully from the expansion of production, and profitability will increase rapidly. The profit forecast and target price were raised. The 19-21 EPS was adjusted from 0.12/0.39/0.70 yuan to 0.20/0.55/0.86 yuan, giving the target price of 35.83 yuan, maintaining the “buy” rating.
Risk warning: The construction progress of new production lines falls short of expected risks, competition in the MEMS industry increases the risk, demand from downstream enterprises falls short of expected risks, the risk of drastic changes in exchange rates, and the risk of large fluctuations in military orders.