Xingsen Technology (002436) 2019 First Quarter Results Forecast Amendment Announcement Comments: Q1 Performance Preview Revised Profitability Continued Improvement

03/20/2020 0 Comment

Xingsen Technology (002436) 2019 First Quarter Results Forecast Amendment Announcement Comments: Q1 Performance Preview Revised Profitability Continued Improvement

Event: The company issued a notice on the revision of the first quarter of 2019 performance forecast. It is estimated that the net profit attributable to mothers in the first quarter will be about 3294.

61 million—3912.

350,000 yuan, an increase of 60-90% in ten years.

The summary of the 2018 annual report announced by the company headquarters re-discloses the first quarter of 2019 performance forecast, mainly because the company originally expected that the net profit attributable to the parent in the first quarter would not change by more than 50%.

Opinion: The first-quarter performance forecast is revised upwards, and the operating conditions of the subsidiaries have improved significantly. The company expects that Q1 net profit attributable to mothers will continue to grow in the range of 60% to 90%, with a median of 75%, corresponding to a net profit attributable to mothers of approximately 3,603.

480,000 yuan, exceeding expectations.

In addition to the Guangzhou headquarters, the company’s business also includes many subsidiaries including Yixing Subsidiary, Hunan Yuanke, Zefeng, Haber, Fineline and others. The company continues to strengthen internal management, so that some of the subsidiaries achieved profitability in Q1, bringing more profit to the company.Earlier incremental profit contribution; the company’s IC carrier board business continued to maintain rapid growth in revenue, meanwhile, its profitability improved significantly, and it also contributed to the first quarter performance.

The IC carrier board has a first-mover advantage, and future profitability is expected to continue to improve. The company entered the IC carrier board industry in 2012 and became the first domestic manufacturer to enter this field.

Due to the serious defects of the IC carrier board, the company’s IC carrier board project had a lower yield in the early stage, which resulted in poor profitability and brought controversial drag to the company’s overall performance.

After nearly 6 years of accumulation, the company has gradually mastered the key technologies in the IC carrier board process. At present, the core indicators of IC carrier board project yield, capacity conversion and other indicators are constantly improving, significantly reducing losses, and it is expected to make significant improvements in future profitability.

Due to serious defects in IC substrates, there are currently a large number of manufacturers with IC production capacity in China, including Shennan Circuits, Xingsen Technology and a few other manufacturers.

The existing company’s IC carrier board has a capacity of 10,000 square meters / month. According to the company’s expansion announcement, it will increase to 18,000 square meters / month in the second half of 2019.

After the expansion is completed, the company will become the second IC carrier board manufacturer 重庆桑拿 with the largest domestic production capacity.

Due to the serious technical shortcomings of IC substrates, we believe that other manufacturers entering this field need to shorten their time for technical reserves and ramp-up of production capacity. The company will gradually replace its internal first-mover advantage.

The 5G large-scale construction is approaching, and the company’s PCB business has ushered in new growth opportunities. PCBs are widely used in various aspects such as wireless networks, transmission networks, data communications, and fixed-line broadband, and are usually backplanes, high-frequency high-speed boards,Products with higher added value such as multilayer boards.

5G is a next-generation mobile communication network, and there will be a large number of infrastructure construction requirements at 杭州桑拿 that time, which is expected to significantly stimulate the demand for communication boards.

Among the company’s downstream applications, revenue from communications accounts for 36%, which is the highest application.

The company’s communications customers include top equipment manufacturers such as Huawei, ZTE, and Fiberhome, and have cooperated stably with customers for many years, and have deep customer relationships in the communications field.

As 5G construction will accelerate in the second half of 2019, the development needs of major communications equipment manufacturers will usher in rapid growth, and the demand for PCB prototypes will significantly increase.

Relying on high-quality customer resources, the company is expected to clearly benefit from 5G construction, and 5G will become an important growth driver for the company for many years to come.

Profit forecast, forecast and rating and some subsidiaries of rating companies turn losses into profits, and will start to contribute to the performance potential of contribution in the future. The IC carrier board business is progressing well and is expected to further improve in 2019. At the same time, the company actively expands production capacity and has a good future development prospect; With the advent of 5G, the company’s PCB business has ushered in new growth momentum, and the future development space is broad.

We maintain the company’s EPS for 2019-2021 to be 0.



34 yuan, maintain “Buy” rating.

Risk reminders: Emerging demand for 5G and other issues is less than expected; IC carrier board production capacity and yield climb are less than expected; rising raw material prices erode profitability.