Shennan Circuit (002916) 2019 Interim Report Comments: 5G continues to benefit from near-upcoming results

Shennan Circuit (002916) 2019 Interim Report Comments: 5G continues to benefit from near-upcoming results

The company is a leader in the PCB industry, benefiting from the explosive growth of 5G demand and domestic substitutes for substrates, and its performance in the first half of the year slightly exceeded expectations.

The high-speed board and IC carrier board generate a rhythmic release of performance growth base, maintaining the “Buy” rating.

The rapid growth of 2019H1 performance slightly exceeded market expectations.

The company realized in the first half of the year: operating income 47.

9.1 billion (47.7%).

90%), net profit attributable to mother4.

7.1 billion (68.

02%), the net profit is close to the upper limit of the notice.

The Q2 chain increased significantly: operating income was 26.

2.9 billion (compared with 21.

54%), net profit attributable to mother 2.
.

8.4 billion (52.

20%).

The company’s continued growth in performance is mainly due to three reasons: (1) strong demand for large-scale PCB boards from domestic 5G and Datacom; (2) company’s expansion of production capacity to drive revenue growth; (3) the industry’s environmental protection requirements improve the competitive landscape.

Printed circuit board business: Leading in 5G share, it is expected to continue volume in the second half of the year.

The company’s revenue in the first half of the year was 35.

2.8 billion (53.

44%), communication, server demand pulling significantly.

The company is the leader in the equipment PCB industry. It has the largest share in Huawei and the top three allocations by Ericsson and Nokia. Capacity reserve, process accumulation and business cooperation constitute barriers to competition. In the first half of the year, 5G communication products gradually entered the batch stage, and capacity occupied a relatively high level.
Gross profit margin in the first half of the year was 24.

48% (approximately 0 in 2018H1.

57 pct), contributing slightly to the increase in the proportion of high-value products.

Looking into the future: 5G continues to advance in China, and public information shows that Huawei issued 150,000 5G in the first half of the year, and plans to issue more than 500,000 shipments.
The number of 5G stations will climb rapidly in 2022, and the company will benefit a lot.

The company plans to start the second phase of Nantong project mainly for high-speed and high-density multilayer printed circuit boards. We estimate that the planned production capacity is 50?
600,000 square meters, is expected to grow long-term basis.

Package substrate business: Wuxi plant started production and production capacity continued to climb in the second half of the year.

The company’s annual income in the first half of the year 5.

01 billion (29% year-on-year.

70%), the company maintains the technology and yield advantages of MEMS packaging substrates. In addition, fingerprints, RF modules, and storage products have grown rapidly.

The company’s Wuxi plant connected to 佛山桑拿网 trial production in June and is currently in the climbing phase (expected climbing period 1?
2 years), with a full production capacity of 600,000 square meters, we expect to double the revenue of the substrate business. We expect the business to achieve a break-even in the second half of 2020.

Electronic assembly business: Operational capabilities continued to improve.

Company revenue for the first half of the year 5.

7 billion (42.

96%), mainly due to increased demand in the communications field, and the gross margin level of this business has decreased. It is expected that the scale will be controlled in the future.

Risk factors: 5G base station construction is less than expected; new capacity climbs higher than expected; package substrate prices fluctuate.
Profit forecast and estimation.

The company 杭州夜网 is a leader in the equipment PCB industry, benefiting from the outbreak of 5G demand and domestic substitutes for substrates, generating a rhythmically released productivity growth foundation.

Considering that the maximum production capacity exceeds expectations, the increase in 2019?
Net profit forecast for 2021 is 10.

1.3 billion / 13.
20 billion / 15.

85 ppm (previous forecast was 9.

51/12.

67/15.

29 trillion, change 6.

4% / 4.

twenty three.

7%), corresponding to an EPS prediction of 2.

99/3.

89/4.

68 yuan, maintain “Buy” rating.