Shenzhen Sunnypol Optoelectronics Co.Ltd(002876) (002876)
Key investment points:
Polarizer market shifts to Chinese mainland with panel production capacity
As one of the key materials upstream of the display panel, the market trend of polarizer is highly related to the panel industry. According to omdia’s estimation, the effective capacity of LCD panels in China will increase from 138 million square meters to 215 million square meters from 2020 to 2024, with a compound growth rate of 11.72%; The corresponding demand for polarizers will increase from 304 million square meters to 472 million square meters, with a compound growth rate of 11.63%. The panel production capacity is transferred to the mainland, opening the space for localization of polarizers.
Longgang production line reached production capacity this year, and the new production lines in Putian and Hefei opened the capacity ceiling
The release of production capacity promotes the growth of revenue. Since the Hefei plant was put into operation in 2016, the revenue has increased from 05 million to 1.11 billion in 2020, accounting for 58.29% of the company’s revenue. After Longgang line 6 is put into production in 2021, the company’s production capacity excluding black-and-white polarizers will reach 32 million square meters. Putian and Hefei factories are under construction planning. Hefei phase II plans to have a 2500mm wide polarizer production capacity of 30 million square meters, all of which will be used in the field of TV. After reaching the production capacity, the company’s TV polarizer production capacity will increase significantly.
Support upstream manufacturers of raw materials, improve the supply pattern and ensure profitability
The key raw materials upstream of the polarizer are PVA film and TAC film. TAC film accounts for about 50% of the cost, and there are many suppliers, including Fuji, Konica Minolta, etc. lucky in mainland China has technical capacity, and pet and other materials can also partially replace TAC film; PVA film accounts for about 12% of the cost. The main suppliers are kelaoli and Mitsubishi Chemical. The company supports product verification of several PVA manufacturers, of which Anhui Wanwei Updated High-Tech Material Industry Co.Ltd(600063) 7 million square meters of PVA film project is expected to be put into operation in the middle of next year. The upstream material supply pattern continues to improve, helping the company reduce costs.
Earnings forecast, valuation and rating
We expect the company’s revenue from 2021 to 2023 to be RMB 2.405/3.216/4.558 billion respectively, with a year-on-year growth rate of 26.24% / 33.73% / 41.70% respectively; EPS is 2.04/2.99/4.82 yuan respectively, corresponding to 27 / 18 / 11 times of current PE respectively, and the net profit CAGR from 2021 to 2023 is 53.55%. In view of the high growth of the company, peg is given about 0.8, corresponding to 40 times PE in 2021. The reasonable market value of the company is 14.208 billion yuan, corresponding to the target price of 81.71 yuan. It is covered for the first time and given a “buy” rating.
Risk statement
Risks such as intensified competition and concentrated supply of raw materials in the polarizer industry.
