Brief comment on performance
On April 26, the company released its annual report 2020 and quarterly report 2021. In 2020, the company realized revenue of 2.12 billion yuan (YoY+100.35%), net profit of 140 million yuan (YoY-10.17%) and deduction of 100 million yuan (YoY-24.65%); 21Q1 realized revenue of 830 million yuan (YoY+88.53%, QoQ+24.57%), net profit of 77.15 million yuan (YoY+140.10%,QoQ+66.56%), and net profit of 70.9 million yuan (YoY+162.82%,QoQ+144.68%). Q1 gross profit margin is 18.90% (YoY+2.91pct, QoQ+4.76pct) and net profit rate is 9.27% (YoY+1.99pct, QoQ+2.33pct).
Business analysis
The operating pressure was finally released, and the volume and price profits rose to win growth. From the 2020 results, we can see that the company was under serious pressure on operating profits last year, the key reason is that the company opened more capacity in the new factory last year (Jiangxi No. 1 factory opened three lines in or before 2020). The commissioning of the new factory and the climbing of production capacity will lead to the loss of costs, which will eventually drag down the company's profits. From the 21Q1 performance, we can see that the operating status of the company has been continuously adjusted, and the gross profit margin and net profit margin have reached the highest values of the disclosed data, thus it can be seen that the operating conditions of the new factory have been improved, coupled with the profit release brought about by this year's price rise cycle, which finally makes the volume and price profit of the company rise in the first quarter.
The release of production capacity helps the company to become the beneficiary of the rising price market. According to the research, we believe that the price increase will raise the profit anchor of the leading copper clad laminate manufacturers. As the top 15 manufacturers in the world and the top 4 manufacturers in China, the probability of raising the profit anchor in the price increase market is relatively high. In addition, we expect the company's production capacity to increase by 33% this year, so sales are also likely to achieve growth, according to the framework of "unit profit * sales volume = total gross profit". We believe that the company's high performance and growth this year has great certainty.
High-end products break through customers, and the product structure is expected to be significantly improved. The company is one of the early manufacturers of high-speed copper clad laminates in China, and its products have been certified by important customers, and the volume of high-end products is expected to achieve volume this year. In view of the fact that the normal price level and profitability of high-end products are better (more than 20% higher than the price of FR4 products), we believe that the volume of high-end products will provide a guarantee for the company's long-term growth.
Investment suggestion
In view of the superposition of the company's new production capacity volume, price increase profit anchor and high-end product volume this year, we increase our profit forecast for 212023 to 3.06 (up 28%)\ 4.11 (up 5%)\ 473 million yuan, corresponding to a PE of 24X\ 18X\ 16X, continue to give a "buy" rating.
Risk tips: demand is lower than expected; falling prices lead to lower-than-expected profits; and restricted shares are lifted.
