Industry strategy: we believe that this year and next will be another interpretation of the typical cyclical boom of the PCB industry chain. As a key raw material in the upstream of PCB, copper clad laminate products will continue to be in the periodic attribute stage. According to the cyclical judgment, the copper clad laminate industry will start the price reduction cycle next year, and the industry price will gradually return to the normal state; When the price reduction trend of copper clad laminate has been determined, we believe that we should pay attention to the change of single gross profit of manufacturers to judge whether they can get out of the dilemma of single gross profit. Recommended combination: we suggest to give priority to the copper clad laminate companies that can cope with the cycle and take the lead in realizing the reversal of single gross profit, and then pay attention to the manufacturers with high-end product layout such as automobile \ miniled \ server \ carrier board. Our recommended order is: Shengyi Technology Co.Ltd(600183) , Nanya New Material Technology Co.Ltd(688519) , Zhejiang Wazam New Materials Co.Ltd(603186) .
Industry perspective
The price premium cycle brought by the relationship between supply and demand makes CCL earn ultra-high profits. This year, PC (the first three quarters were + 23% year-on-year), home appliances (the sales of air conditioners, refrigerators and washing machines from January to October were + 8%, 5% and 14% year-on-year), automobiles (the sales from January to November were + 5%, including new energy vehicles + 177%) and mobile phones (shipments in the first three quarters increased by + 9.3% year-on-year), which finally pushed up the downstream PCB output of CCL by 13.2%, indicating strong demand; at the same time, the expansion range of copper clad laminate leader was only 6.7% (less than the downstream demand increment of 13.2%), the dislocation of increased production capacity (expanding high-end capacity, low-end products with price increases), and the price rise of raw materials limited the effective capacity (small manufacturers cannot buy raw materials) and other reasons lead to relatively limited effective supply. Under such a supply-demand relationship, the copper clad laminate industry has ushered in a high-profile market this year. As of the first three quarters of 2021, the average growth rate of revenue of five A-share copper clad laminate companies has reached 65%, and the average growth rate of net profit attributable to the parent company has reached 227%. It can be seen that this year is the overall price rise of the industry (reflected in revenue growth) and realize premium (reflected in profit growth significantly higher than revenue growth).
The weakening of demand margin has appeared in Q3, and the price reduction cycle of copper clad laminate has started. In terms of terminal shipments / sales, Mobile phones (Q3 year-on-year growth fell to – 6%), automobiles (July / August / September year-on-year growth fell to – 12% / – 18% / – 19%), PCS (Q3 year-on-year growth fell to 7%), and home appliances (the year-on-year growth of air conditioners, refrigerators and washing machines fell to 2% / 3% / 1%, – 9% / – 12% / – 8%, and 14% / 5% / 3% in July / August / September). Combined with grassroots research and periodic judgment, demand has shown weakness in Q3. The weakening of demand has been reflected in the 21q3 single quarter gross profit margin of five A-share copper clad laminate manufacturers ( Shengyi Technology Co.Ltd(600183) , Goldenmax International Technology Ltd(002636) , Nanya New Material Technology Co.Ltd(688519) , Zhejiang Wazam New Materials Co.Ltd(603186) , Changzhou Zhongying Science & Technology Co.Ltd(300936) ) Gross profit margin was – 3.2pct, – 8.2pct, – 2.9pct, – 1.6pct, – 6.3pct) month on month. According to the characteristics of the industry cycle, we believe that the price reduction cycle of copper clad laminate has been started, and the price of copper clad laminate will gradually return to the normal level in the next year.
Single gross profit reflects bargaining power and pricing power, and those with strong ability can lead out of the cycle dilemma first. After the price reduction cycle of copper clad laminate is opened, what really determines the profitability of copper clad laminate manufacturers is the change relationship between unit price and cost, and the indicator that can reflect this change relationship is single gross profit. The change of single gross profit reflects the difference between the pricing power (unit price) to the downstream and the bargaining power (unit raw material cost) to the upstream raw material manufacturers. For different manufacturers, this ability is different. Take the world’s top two copper clad laminate manufacturers to build laminates and Shengyi Technology Co.Ltd(600183) in the last round of cyclical boom For example, after the price of Jiantao laminate peaked, the single gross profit began to fluctuate and decline, and the profit was under pressure; but Shengyi Technology Co.Ltd(600183) After the price peaked, although the single gross profit suffered a short-term setback, it soon began to rise and continued to improve in the future, bringing the opportunity of profit + valuation double rise with performance exceeding expectations. Therefore, in such a cycle stage, we believe that we should pay attention to manufacturers with strong raw material management ability. Such manufacturers are likely to make their single gross profit out of the cycle dilemma when the industry price is still in the downward stage, so as to release the performance level higher than expected.
Risk statement
The demand boom is lower than expected; The price of raw materials remains high; Increased competition leads to insufficient production capacity
