20210201-招银国际-生益科技-600183.SH-4Q20_miss_on_slower_5G_and_cost_pressure_Expect_gradual_GPM_recovery_in_1H21E_6页_1mb

Shengyi Technology (600183CH) Company Update Summary

Core Content

Shengyi Technology, a key player in the China technology sector, recently reported its FY20 preliminary results, which showed revenue and net profit growth of 11% and 14% YoY, respectively. However, the actual earnings fell 12% and 10% short of the analysts' and consensus estimates. The 4Q20 results were particularly weak, with revenue and net profit growth of 6% and -11.6% YoY, attributed to slower-than-expected 5G deployment and margin pressure due to increased copper prices that have not been fully passed on to downstream clients.

Main Points

Revenue and Earnings Performance

• FY20 Revenue: RMB14,687 million (+11% YoY)
• FY20 Net Profit: RMB1,663 million (+14% YoY)
• 4Q20 Revenue: RMB3,997 million (+6% YoY)
• 4Q20 Net Profit: RMB359 million (-11.6% YoY)

Earnings Miss

• The earnings miss was primarily due to:
  • Weak telecom demand from slower 5G BTS deployment in 4Q20
  • Delayed cost transfer to downstream clients, especially due to copper price hikes

Revised Estimates

• CMBIS revised its FY20-22E estimates down by 10–13% to reflect more conservative assumptions
• Target Price (TP) was reduced to RMB29.45 (30x FY21E P/E), with a 26% upside from the current price of RMB23.34

Future Outlook

• GPM Recovery: Expected gradual improvement in gross margin as CCL prices are set to rise in 1Q21E
• Capacity Expansion: A new project announced to add 11.4 million square meters of CCL and 36 million meters of prepreg capacity, with a total investment of RMB945 million
• New Revenue Streams: The new capacity will cover HDI, 5G communications, consumer electronics, auto, and wearables, helping to diversify revenue and accelerate expansion into new markets

Key Information

Stock Performance

• Market Cap: RMB53,078 million
• Avg. 3mths Turnover: RMB1,003 million
• 52-Week High/Low: RMB36.8 / RMB19.86
• Total Issued Shares: 2,290.8 million

Shareholding Structure

• Guangdong Guangxin Holdings: 22.11%
• Dongguan Guohong Invest.: 15.02%
• Weihua Electronics: 14.24%

Price Performance

• 1-Month: -9.4% (Absolute) / -11.8% (Relative)
• 3-Month: +6.7% (Absolute) / -6.4% (Relative)
• 6-Month: -11.3% (Absolute) / -22.2% (Relative)

Valuation

• Current P/E: 23.8x (FY21E)
• Target Price: RMB29.45 (30x FY21E P/E)
• Upside Potential: 26% from current price
• 1-Year Historical Forward P/E: 30x
• P/B Ratio: 4.8x (FY21E)
• ROE: 20.2% (FY21E), expected to increase to 22.6% (FY22E)

Analyst Recommendations and Risks

• Recommendation: Maintain BUY
• Potential Risks:
  • Slower-than-expected transfer of material costs
  • Delay in 5G upgrades

Financial Summary

Income Statement

• Revenue: RMB14,687 million (FY20E), RMB18,442 million (FY21E), RMB22,831 million (FY22E)
• Gross Profit: RMB3,969 million (FY20E), RMB5,046 million (FY21E), RMB6,315 million (FY22E)
• Net Profit: RMB1,662 million (FY20E), RMB2,249 million (FY21E), RMB2,849 million (FY22E)
• EPS: RMB0.73 (FY20E), RMB0.98 (FY21E), RMB1.24 (FY22E)

Cash Flow Summary

• Net Cash from Operating: RMB1,751 million (FY20E), RMB1,847 million (FY21E), RMB3,387 million (FY22E)
• Capex: RMB1,699 million (FY20E), RMB1,395 million (FY21E), RMB1,734 million (FY22E)
• Net Change in Cash: RMB362 million (FY20E), RMB(246) million (FY21E), RMB678 million (FY22E)

Balance Sheet

• Total Assets: RMB18,313 million (FY20E), RMB21,222 million (FY21E), RMB23,714 million (FY22E)
• Total Liabilities: RMB7,787 million (FY20E), RMB9,262 million (FY21E), RMB10,023 million (FY22E)
• Total Equity: RMB10,526 million (FY20E), RMB11,960 million (FY21E), RMB13,691 million (FY22E)

Key Ratios

• Revenue Mix:
  • CCL: 72% (FY20E), 66% (FY21E), 63% (FY22E)
  • PCB: 24% (FY20E), 32% (FY21E), 36% (FY22E)
• Gross Margin: 27.0% (FY20E), 27.4% (FY21E), 27.7% (FY22E)
• Operating Margin: 14.0% (FY20E), 15.1% (FY21E), 15.4% (FY22E)
• Net Profit Margin: 11.3% (FY20E), 12.2% (FY21E), 12.5% (FY22E)
• Current Ratio: 1.4 (FY20E), 1.4 (FY21E), 1.5 (FY22E)
• ROE: 16.8% (FY20E), 20.2% (FY21E), 22.6% (FY22E)

Valuation Comparison

Analyst Certification

• The analyst certifies that the views expressed in the report accurately reflect their personal opinions
• The analyst has not engaged in trading the stock covered in this report within 30 days prior to the report's release or within 3 business days after

CMBIS Ratings

• BUY: Potential return of over 15% over the next 12 months
• HOLD: Potential return of +15% to -10% over the next 12 months
• SELL: Potential loss of over 10% over the next 12 months
• NOT RATED: Stock is not rated by CMBIS

Disclaimer

• There are risks involved in trading any securities
• The report is for informational purposes only and does not provide personalized investment advice
• Past performance does not guarantee future results
• The value of investments may fluctuate due to market conditions and other factors
• CMBIS is not liable for any losses incurred from relying on the report
• The information is based on publicly available data and may be subject to change without notice