Shennan Circuit (002916) 2018 Annual Report Commentary: Future IC Carrier Board with 5G Performance in Accordance with Expectations to Boost Company Growth

Shennan Circuit (002916) 2018 Annual Report Commentary: Future IC Carrier Board with 5G Performance in Accordance with Expectations to Boost Company Growth

[Investment Highlights]The 2018 performance is in line with expectations, and the profit for the first quarter of 2019 is expected to increase by 40% -60%.

The company released its 2018 annual report, which gradually realized revenue and net profit attributable to mothers of 76 respectively.

02, 6.

97 ppm, +33 for ten years.

68%, +55.

61%; gross margin and net margin are 23 respectively.

13%, 9.

19%, -0 per year.

04pct, +0.

5pct, the gross profit margin has declined due to the climbing capacity of the new plant in Nantong.

From a single quarter point of view, from Q1 to Q4 of 2018, the company’s revenue and net profit attributable to mothers increased quarter by quarter.

65, 2.

2.4 billion, +8.

03%, +16.

49%; gross margin and net margin reached 24 respectively.

12%, 9.

91%, +2 from the previous quarter.

12pct, +0.

The profitability of 74pct and Q4 was greatly improved, mainly because the production capacity of the Nantong plant climbed 天津夜网 higher than expected, and the capacity utilization rate reached 80% by the end of 2018.

The company expects that the net profit attributable to mothers will continue to increase by 40% -60% in 2019Q1, and the performance will continue to maintain high growth.

Look at the Nantong factory in the first half of 19, and look at the Wuxi factory in the second half of the year.

In 2018, the company’s PCB business achieved revenue 53.

79 trillion, +38 a year.

15%, gross margin reached 23.

04%, revenue accounted for more than 70%.

The Nantong Smart Factory, which was raised by the company’s IPO, went into production in mid-2018 and turned around in Q4. It is expected that the Nantong Factory will be fully operational in 2019H1, contributing to the company’s performance increase.

According to the announcement, the Wuxi IC carrier board project raised by the company’s IPO is about to be put into production in June 2019, and the capacity climb will begin in the second half of 2019.

The company’s Wuxi IC carrier board project focuses on memory chips, while the construction of domestic memory chip projects is steadily advancing.

The company’s storage customers have developed smoothly, with orders in hand, and the future growth of IC substrates is worth looking forward to.

5G base station construction is accelerating, and 5G PCB is the company’s long-term development driver.

In 2019, domestic mobile phone manufacturers have released a variety of 5G mobile phones, and the 5G commercial process has begun to accelerate.

5G core manufacturer—Huawei has received 5G orders from multiple countries, and the construction of domestic 5G base stations is accelerating at the same time.

At present, 5G PCB’s revenue share in the company is still very low, but the company’s Nantong high-frequency high-speed PCB factory still has 3/4 volume of empty space, and there is a lot of capacity.

With the acceleration of the 5G base station construction process, the company will definitely benefit from 5G construction, and 5G will become the company’s long-term development momentum.

[Investment suggestion]The domestic 5G construction is accelerating. The company is a leading PCB company in the communications industry. It will definitely benefit from the acceleration of 5G construction in the future. Based on the company’s 2018 annual report, we have raised the company’s 2019 and 2020 profit forecasts./ 2020/2021 revenue is 95.

20 (+3.

47%) / 118.

03 (+5.93%) / 141.

9.7 billion; net profit attributable to mother is 9.

68 (+11.

39%) / 13.

42 (+22.

89%) / 17.

4.3 billion; EPS is 3.

42/4.

74/6.

16 yuan, corresponding to PE is 38/28/21 times, maintaining the “overweight” level.

[Risk Warning]The construction speed of 5G base stations is lower than expected; the price of upstream raw materials changes; the construction speed of new factories is lower than expected.

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