Wus Printed Circuit (Kunshan) Co.Ltd(002463) (002463)
Affected by the price of raw materials and the progress of base station construction, the company’s performance in the first three quarters was under pressure: the company realized an operating revenue of RMB 5.412 billion in q1-q3 in 2021, a year-on-year decrease of 2.61%; The net profit attributable to the parent company was 786 million yuan, a year-on-year decrease of 17.7%; The net profit attributable to the parent company after non deduction was 703 million yuan, a year-on-year decrease of 22.73%. In the first half of this year, the slowdown of 5g construction of operators, weak demand in the communication market and the sharp rise in the price of raw materials upstream of PCB became the main factors restricting the growth of the company’s performance.
In the first half of 2021, the performance of enterprise communication market board was weak, while the growth of automobile board was strong: due to the obvious slowdown of 5g construction speed in the first half of 2021, the weakening demand for communication equipment, and the impact of semiconductor supply shortage on data center related products, the growth rate of enterprise communication market board slowed down, the revenue decreased by 14.44% year-on-year, and the gross profit margin decreased by 2.21pct to 31.27% year-on-year, of which, The operating revenue of related products in the application field of 5g base station decreased by about 304 million yuan year-on-year, a significant decrease of about 38.17% year-on-year, and the gross profit margin decreased by about 9.19 PCT year-on-year. The automotive market has rebounded strongly since the second half of 2020. Although the shortage of chips affects the global automotive market, the automotive industry is experiencing a variety of subversive trends such as electrification, intelligence and networking, and the proportion of automotive electronics in vehicle manufacturing costs is increasing. In this context, the production capacity of the company’s Huangshi No. 2 plant’s automobile board special line was released rapidly. In 2021h1, the automobile board business realized an operating revenue of about 899 million yuan, a significant year-on-year increase of 60.81%; The gross profit margin of the company’s automobile board business remained relatively stable, about 24.71%, with a slight decrease of 0.11pct year-on-year.
The development of data center gives birth to the strong demand for high-frequency and high-speed PCB products, and the 5g construction of operators is accelerated: due to the development of Internet of things, automotive intelligence and big data, the demand for traffic and data processing, storage and transportation will show exponential growth, because the IDC market maintains high-speed growth. At the same time, the capital expenditure of overseas giants has gradually increased. With the server platform changing from purely (pcie3.0 bus) to Whitley (pcie4.0 bus), the demand for high-speed PCB boards has further increased. The company’s R & D direction focuses on product R & D in application fields such as 112gbps optical network transmission, core router, 800g switch, next-generation server, AI training and reasoning platform, It is expected that the company will deeply benefit from the upgrading iteration of data center servers and switches. In the first half of this year, the speed of 5g construction slowed down, and the three operators did not open large-scale bidding and centralized purchase of 5g base stations. However, in the second half of this year, operators began large-scale bidding and centralized purchase of 5g wireless side. As of November, 1.396 million base stations had been built in China, and 436000 new base stations had been built in the second half of this year, which was significantly higher than the 190000 new ones in the first half of this year. According to the information and communication industry development plan of the 14th five year plan issued by the Ministry of industry and information technology, the number of 5g base stations per 10000 people in China will increase from 5 in 2020 to 26 by 2025. It is expected that PCB products in the application field of 5g base stations will be released in the future.
The resonance of automobile electrification and intelligence promotes the incremental space of PCB Market: under the background of the rapid penetration of new energy vehicles, automobiles will gradually evolve into high-tech products with intelligence, informatization and mechatronics. Their requirements for the performance and reliability of automobile boards are constantly improving, and the ratio of PCB contained in each vehicle is also growing. The company’s layout includes automotive information and entertainment, powertrain and chassis (steering, braking) and other automotive electronics segments. The company invested in Schweizer, an old German high-end PCB manufacturer, to jointly develop high-end products such as millimeter wave radar high-frequency PCB, and achieved mass production of 24GHz millimeter wave radar PCB in 2019. 77GHz products are also under development. On the one hand, the company will appropriately expand the production capacity of Huangshi No. 2 automobile board special line to meet the needs of customers; On the other hand, more resources will be invested in the development and capacity expansion of high-level automotive HDI products, the application research of automotive high-frequency and high-speed materials, the R & D of highly reliable products and the improvement of production efficiency, so as to enable the company to maintain and expand its competitive advantage.
For the first time, the company was given an “overweight” investment rating: considering the recovery of future demand for the company’s enterprise communication market board; The company’s auto panel capacity continues to expand, and there is a broad space for auto electronics increment in the future; The price of upstream raw materials is expected to be corrected, the marginal cost pressure will be reduced, and the company will be given an “overweight” investment rating for the first time. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 1.244/1.511/1.856 billion respectively, the corresponding EPS will be RMB 0.66/0.80/0.98/share respectively, and the corresponding current PE valuation will be 24.97/20.56/16.74 times respectively.
Risk warning: the company’s technological transformation ability is not as expected; The price rise of upstream raw material copper clad laminate erodes the cost and the demand for server PCB is less than predicted; The demand for PCB in 5g base station is lower than expected; 400g switch iteration is not as expected; The market competition of Automotive PCB is intensified.
