Shengyi Technology (600183): 5G construction cycle is good for long-term company development
The company’s recent situation, we re-recommend Shengyi Technology and maintain a target price of 17.
0 yuan and “Outperform Industry” rating.
As we pointed out in the “3G Investment Opportunities for 5G”, the company will benefit from the long-term gains in 5G-promoted PCB / CCL and other electronic components in terms of volume and price and domestic substitution.
As the price of raw materials stabilizes, we are optimistic that Shengyi, as the core supplier of Huawei and ZTE, will benefit from the growth momentum brought by 5G for a long time and continue to recommend it.
Comment on the trend of domestic replacement of high-frequency copper-clad laminates, and gradually release capacity in the second half of the year.
At present, the company has the ability to replace Rogers products in some high-frequency copper-clad laminates (PTFE and hydrocarbon copper-clad laminates), and has its own formula for PTFE (the main material of high-frequency copper-clad laminates).
The company’s first-phase production capacity in Nantong will be gradually released in the second half of the year, which will also benefit the company’s performance in the second half of the year.
We expect that the new products will gradually bring a profit increase of RMB 50 million to the company in 2019, accounting for about 5% of the long-term forecasted profit.
In 2020, through the maximization of new product capacity and the continuous expansion of the second-phase copper clad laminate production capacity, we are optimistic about the construction of 5G, which will bring performance flexibility to the company.
Copper prices are stabilizing + demand is picking up, and copper clad laminate prices are expected to stabilize.
Affected by the uncertainty of Sino-US trade frictions, copper futures prices (LME copper) fell 9% from US $ 6,464 / ton in mid-April to US $ 5,858 / ton at the end of May.
With the recent interest rate cuts and quantitative easing expectations, copper futures prices have rebounded by 3% to $ 6,015 / ton, which will help the company maintain unit prices of copper-clad laminates this year.
With the gradual advancement of 5G progress in the second half of the year, we expect that the demand for PCBs will continue to pick up.
We still have enough confidence in the company’s performance growth this year, and we are optimistic about the company’s growth in the long run.
Equity incentives show long-term growth confidence: the company recently announced that it has granted 483 people1西安耍耍网.
2 billion shares, first grant price / exercise price: 13.
35 yuan / share, reflecting the company’s management’s confidence in long-term growth.
It is estimated that the company’s performance has an expected correlation with the copper price. Recently, the company has benefited from the quantitative easing of copper prices and the domestic substitution trend of 5G cross-products.
Doubled 47% to 28.
The current consensus of the company corresponds to 28 of 19/20.
9 times P / E.
We maintain 2019e / 2020e EPS of RMB0.
61 yuan, maintain “outperform industry” and target price of 17.
0 yuan, corresponding to 19/20 year 32.
8x P / E (17% upside).
Risks 5G progress is less than expected, and CCL prices fluctuate.