Shennan Circuits (002916) 2019 Third Quarter Report Preview Comment-Forecast Performance Exceeds 5G Core Benefits

Shennan Circuits (002916) 2019 Third Quarter Report Preview Comment-Forecast Performance Exceeds 5G Core Benefits

The company foresees that the third-quarter 2019 results are better than expected, and that the communications equipment PCB industry leader is solid, benefiting from the outbreak of 5G demand and domestic substitution of substrates. It has raised its profit forecast and maintained a “Buy” rating.

The performance of the first half of the year was high, and the Q3 single quarter forecast exceeded expectations.

The company released the 2019 third quarter report preview: it is expected to achieve net profit in the first three quarters7.


7.5 billion (65?
85%), corresponding to the third quarter net profit3.


0.4 billion (60% year-on-year.



According to the median forecast, the first three quarters are expected to achieve net profit8.

28 trillion, exceeding market expectations, the growth in the third quarter will exceed the level in the first half.

Printed circuit board business: 5G core supplier, Nantong Phase I contributed new capacity.

The company is the leader in the equipment PCB industry. Among the similar suppliers, the company has the largest share in Huawei, and Ericsson and Nokia share the top three. Capacity reserves, process accumulation and business cooperation constitute barriers to competition. Since 2019, capacity utilization has been at a high level.

The first phase of Nantong officially started production in 2019, with operating income and net profit of 5 in the first half of the year.

1 billion and 0.武汉夜生活网

490,000 yuan, as of August 31, 2019, the amount of orders in hand1.

980,000 yuan, is expected to achieve the expected benefits throughout 2019.

The company announced that the convertible bonds to be issued will be invested in the second phase of the project in Nantong. It is mainly aimed at high-speed and high-density multilayer printed circuit boards. It plans to add 580,000 square meters of new capacity.The project is expected to have a long-term growth basis for outstanding performance.

Package substrate business: The production capacity of the Wuxi plant is climbing, and customers are gradually introduced.

The company continues to maintain its technological and production advantages in MEMS packaging substrates. In addition, fingerprints, RF modules, and storage products have grown rapidly.

The company’s Wuxi plant connected to trial production in June and is currently in the climbing phase (expected climbing period 1?
2 years), with a full production capacity of 600,000 square meters, we expect to double the revenue of the substrate business and significantly increase the value of card slots.
Electronic assembly business: Operational capabilities continued to improve.

The rapid growth of revenue is mainly due to the increase in demand in the communications field, and the gross profit level of this business has relatively decreased. It is expected that the scale will be controlled in the future.

Risk factors: 5G base station construction is less than expected; new capacity climbs higher than expected; package substrate prices fluctuate.

Profit forecast and estimation.

The company is a leader in the equipment PCB industry, benefiting from the explosive growth of 5G demand and domestic alternatives to substrates, generating a rhythmic release of performance growth foundation.

Considering the release of industry demand and the landing of the company’s production capacity, the company is raised in 2019?
Net profit forecast for 2021 is 11.



90 trillion (previous forecast was 10.

13 billion / 13.

20 billion / 15.
850,000 yuan, a change of 10.

2% / 16.

3% / 19.

2%), the corresponding EPS prediction is 3.


58 yuan (previous forecast was 2.



68 yuan), currently corresponding to 46/37 / 27x PE, maintain “Buy” rating.