event
The company released the third quarter report of 2019 on the evening of October 20. In the third quarter of 2019, the company achieved revenue of 74050000 yuan, up 13% year on year; The net profit attributable to the parent company was 28.61 million yuan, up 18% year on year; The net profit attributable to the parent company after deducting non profits was 28.42 million yuan, up 25% year on year.
Brief comments
Steady growth in performance and gradual breakthrough in electronic functional materials
The performance of the company in Q3 single quarter has a relatively large year-on-year growth, mainly due to: ① the company's revenue increased year-on-year, while the gross profit margin was basically flat (19Q3 59.53%, 18Q3 59.56%), resulting in a year-on-year increase of 5.08 million yuan in gross profit; ② Three fees, taxes and surcharges totaled 10.4 million yuan, a year-on-year decrease of 1.96 million yuan; ③ Assets, credit impairment losses and investment income decreased by 2 million yuan in total; ④ Income tax increased by 350000 yuan. The total net profit of the above items increased by 4.69 million yuan, which was close to the increase of 4.36 million yuan in the net profit attributable to the parent company. The growth of the company's performance is mainly contributed by the expansion of business scale and revenue scale. According to the disclosure of the company's previous performance forecast, the growth of revenue is mainly contributed by the further breakthrough of electronic functional materials, and the information anti-counterfeiting materials remain stable.
In terms of single quarter quarter on quarter comparison in Q3, since Q2 is the company's traditional off-season (the company's Q2 performance is low over the years), the base number is small, so Q3's performance has a large quarter on quarter increase, with revenue increasing by 44% and net profit attributable to the parent company increasing by 57%.
Traditional information anti-counterfeiting materials provide the company with abundant cash flow
The company's information anti-counterfeiting material products mainly include thermosensitive magnetic tickets, magnetic strips and other products. The thermosensitive magnetic tickets are mainly railway train tickets, that is, common blue magnetic tickets; Magnetic stripe products are common magnetic stripe cards, which are widely used in commercial retail, transportation, finance, social security and other fields in the downstream. In terms of thermosensitive magnetic ticket, the company is the first enterprise engaged in the production of thermosensitive magnetic ticket in China and the largest thermosensitive magnetic ticket manufacturer in China at present. In terms of magnetic stripe, the company occupies more than half of the domestic market share, and is also one of the four largest magnetic stripe manufacturers in the world.
Although the growth of the traditional business segment is sluggish and faces the replacement of e-ticket and EMV migration, it is still a cash cow product of the company, which enables the company to maintain a gross margin of about 60% and a ROE of about 20%, and brings about 110 million cash flows to the company every year, which not only brings rich profits to the company, but also provides sufficient funds for the company's transformation.
Electronic functional materials open up future growth space
As the company's traditional business touched the ceiling of the industry, the company gradually began to lay out the electronic functional materials sector in 2018: in August 2018, the company announced the termination of the implementation of the "expansion project of thermal magnetic ticket production line", and signed an investment agreement with Sichuan Chengmei Petrochemical Park to build an electronic material R&D industrial base in Chengmei Petrochemical Park, focusing on electromagnetic shielding film For pressure test film and other products, the total planned investment is 500 million yuan, the construction period is 3 years, the annual output value after reaching the capacity is 400 million yuan, and the annual tax revenue is 22.5 million yuan.
The downstream of electromagnetic shielding film is mainly used in FPC of flexible circuit board. Due to the prominent problem of 5G signal crosstalk, the amount of electromagnetic shielding film used in FPC will increase, resulting in high demand growth. According to the report of MarketsAndMarkets, the global electromagnetic shielding market will grow from 6.3 billion dollars in 2019 to 8.2 billion dollars in 2024, with an average annual growth rate of 5.34%; The market space of electromagnetic shielding film for FPC will reach nearly 4 billion yuan in the future. In terms of the domestic market, the average annual growth rate of the electromagnetic shielding film market in China from 2014 to 2017 was as high as 21%, and it is expected to maintain a growth rate of nearly 20% in the next few years.
Pressure test film is a kind of material that can accurately measure pressure, pressure distribution and pressure balance. It is used downstream to evaluate the status of production and testing equipment in many fields such as liquid crystal display, semiconductor, electronic circuit industry, mechanical equipment and so on. Major global pressure test film manufacturers include Tekscan (USA), Fujifilm Corporation (Japan), Sensor Expert (USA), Best Australia Pty. Ltd (Australia), etc.
The dependence on imports of domestic products is high. Under the background of the current localization of panels and semiconductors, the company's pressure test film will benefit from both the incremental market and the import substitution market.
At present, part of the company's new products, such as electromagnetic wave shielding film and pressure testing film, have been sold.
It is estimated that the net profit attributable to the parent company in 2019 and 2020 will be 110 million yuan and 170 million yuan respectively, corresponding to PE 24X and 16X, maintaining the rating of overweight.
