Shengyi Technology (600183): Intermediate Report Beyond Expectations, Communication Demand Drives Earnings Elastic Release

03/26/2020 0 Comment

Shengyi Technology (600183): Intermediate Report Beyond Expectations, Communication Demand Drives Earnings Elastic Release

We judged in the previous in-depth report that Shengyi will enter a round of high-frequency and high-speed communication business volume this year and next year, which will bring about improvement in profitability and drive higher-than-expected high-growth growth.Logic; the latest business data disclosed by the Interim Report shows that during the off-season of Q2, Zhongsheng Puzzle has ushered in profitability improvement, regardless of CCL and PCB. In the future, downstream volume such as 杭州桑拿 5G communications and data communications will gradually advance beyond expectations. We raise our profit forecast and continueRaise target price to 26.

4 yuan, maintaining a highly recommended level.

The performance in the first half exceeded the market’s optimistic expectations.

The company achieved revenue of 59 in the first half of the year.

7.3 billion, previously +2.

85%, net profit attributable to mother 6.

2.9 billion, previously + 18%, net of non-attributed net profit 5.

9.2 billion, previously +22.

8%, corresponding EPS is 0.

3 yuan; of which, Q2 single-quarter income of 32.

3.8 billion, previously +8.

62% MoM +18.

37%, net profit attributable to mother 3.

7.9 billion, previously +33.

84% MoM +52.

25%, deducting non-attributed net profit 3.

6.8 billion, previously +58.

7% MoM 杭州桑拿网 +64.

63%, compared with Q1 deduction for non-ten years, -10% actually speeded up and converted, the company’s operating cash flow in the first half of the year reached 10.

800 million, an increase of 152% in ten years.

We believe that the main reason for the performance that exceeded the market expectations during the off-season came from the Q2 communication demand boom driven PCB, the CCL business product structure upgrade and profitability improvement, and Q2 gross profit margin increased significantly by 2%.

8 points to 27.

1%, and the net profit margin also increased significantly by 3pct to 12.

The historical high of 7%; the significant increase in profitability of the copper clad laminate business in Q2 was generally underestimated by the market.

In the first half of the year, the company’s copper-clad laminate and allowable wafer business revenue was 46.

390,000 yuan, at least -2.

3%; gross profit margin 22.

9%, a substantial increase of 4 per year.

4 pct, Q2 gradually changed the profit trend of the business in Q1, which is generally underestimated by the market; we understand that the reason is that the demand for high-speed CCL has continued since Q2, and the company allocates traditional capacity in accordance with the traditional: high-speed ≈ 2: 1Used to produce high-speed products, although the total output in the first half of the year fell by 1%, but the profitability has improved significantly. The traditional CCL delivery period has been extended from 7 days to 15-20 days.Increased gross profit margin.

In addition, the company obtained a certain cost reduction through the leading bargaining power and conversion of domestic suppliers on the raw material side. The price reduction of upstream raw materials was larger than the price reduction of the company’s copper clad laminates, which also led to an increase in gross margin.Expected preliminary.

Shengyi Electronics PCB Business Revenue 12.

55 ppm, + 28% a year, gross margin 32.

7%, a year-on-year increase of 9%.

1 pct, net profit 1.

9.3 billion, previously + 128%, by 78.

Estimated 665% equity contribution in the first half of the year 1.

5.2 billion net profit (net increase of 0 compared to last year.

8.5 billion is the main reason for the deduction of non-100 million net profit in the first half of the year). In the first half of the year, Shengyi Electronic’s output increased by 11% in terms of square meters, and the average price increased by 48% (about 900 yuan), which is in line with the industry law that results in a decrease in output due to the increase in the average number of layers in the product.

We believe that the fundamental reason for the increase in Shengyi Electronics’ gross profit margin is the increase in the average number of layers of the product (the increase in average price), because in the case of an increase in production capacity and an increase of about 20% -30%, the replacement (calculated by calculation) will instead reduce 12%It can be seen that increasing production capacity is used to increase the number of product layers, and the increase in the profit elasticity coefficient of high-level boards is the key to doubling the profit of the PCB business in the first half of the year.

Shengyi Electronics plans to invest 0 in capacity optimization and supporting projects in 2019.

8.3 billion yuan, Dongcheng Phase III expansion project is planned 6.

500 million, the progress as of the end of June were 30% and 44% respectively. Subsequent production capacity will continue to be released, and it is expected to continue to contribute to performance growth; Q3 hopes to further accelerate, and gradually high growth is expected.

At the current point in time, the company’s traditional CCL’s production status of compressed and compressed orders due to capacity allocation has improved the order structure, and it is expected that the traditional peak season of the industry in the second half of the year is expected to mildly pick up; several high-speed CCL products each enter core communicationsThe customer’s 5G product supply chain has gradually expanded and expanded its share, and its volume change trend is increasing month-on-year; Shengyi Electronics expects that in the second half of the Dongcheng Phase III, the production capacity of technological transformation projects will accelerate, and profitability will continue to be maintained; combined with FCCLAs the business continues to increase profits, we believe the company’s Q3 results are expected to continue to exceed expectations.

Considering that the performance base of 18H2 is declining quarter by quarter, we believe that the company’s Q3 growth has accelerated, and 19H2 can maintain high growth and can be expected.

The downstream of the main board of the card communication circuit has entered a new round of high growth.

In the medium and long term, according to Prismark’s statistics, the CCL market space in 2018 is about US $ 400-500 million, and Rogers has surpassed 50% of the market share. At the current point in time, communication demand has driven the overall market expansion, and Chinese core equipment supplier customers have actively introduced Shengyi Technology for domestic substitutionShengyi itself also has core advantages in terms of product delivery and supporting response.

Taking into account that the gross margin of advanced products is 5-10 pct higher than that of traditional products, through the continuous increase in production capacity of the headquarters in Guangdong and Nantong, the company’s high-frequency business will continue to contribute to the profit elasticity.

In terms of high-speed CCL, according to Prismark statistics, the high-speed CCL market space in 2018 was about 1 billion US dollars, and Panasonic replaced more than 25% of the market.

With Panasonic index, Shengyi’s S704X, S7439, and S6 series can be benchmarked against Panasonic’s R5375 series. According to industry research, the above-mentioned parts of Shengyi have entered the 5G supply system of mainstream communications customers, mainly base station backplanes and daughter boards., Computer room services, storage equipment, and other fields, and in product delivery, multi-factory supporting response, price and other aspects also have advantages. Considering that the gross profit margin of high-speed products is slightly higher than ordinary CCL, gradually through the continuous improvement of 5G market demand, downstream import substitution expectationsWith the strengthening of its own capacity, as well as the expansion and deployment of its own production capacity (co-located with traditional production lines), the high-speed CCL business will accelerate its volume.

In terms of PCB, the number of Shengyi electronic products has increased, and the trend of increasing profitability has been formed. Based on this, the industry has explored and understood that the proportion of recent core customer orders has also increased significantly.

Judging from the recent Jiangxi expansion plan, the project has a conservatively estimated annual income of 10 in the first phase.

8.5 billion, annual net profit1.

5.9 billion, the expected annual income of the second phase is more than 1.7 billion, the first and second phase projects will be released in the next 3 years.

Combined with the technological transformation and expansion of the Guangdong headquarters, driven by the long-term demand for communication and service memory, Shengyi Electronics is expected to become the world’s leading high-layer board company relying on the previous card position.

In addition, considering the company’s continued layout in the research and development end, FCCL, packaging substrate materials and other businesses are also expected to gradually grow.

Investment suggestion: Maintain “Highly Recommended-A”, raise earnings forecast and target price to 26.

4 yuan.

We believe that the communications business has become a new core driving force for the company’s performance. At the same time, combined with FCCL profit increase, cost reduction measures, personnel downsizing and internal incentives to optimize management efficiency, the company’s 19-year performance exceeds the market’s optimistic expectations, and 20-year new capacity release is sustainableHigh-speed growth, medium- and long-term market share continued to increase, and continued high-end material layout further increased expectations.

The 2019-2021 revenue forecast is 13/160/19 billion, and the net profit of the mother is 13.



9.5 billion (considering amortization of three-year equity incentive expenses), the corresponding EPS is zero.



92 yuan, corresponding to the current total PE is 37.



0 times, maintain “strongly recommended-A”, raise target price to 26.

4 yuan.

Risk warning: industry demand is lower than expected, 5G exceeds expectations, and industry competition is intensifying.