Aihua Group (603989): Mid-and-downstream demand is trying to improve during the low season in the fourth quarter

Aihua Group (603989): Mid-and-downstream demand is trying to improve during the low season in the fourth quarter
Investment Highlights Event: The company releases its annual report and achieves substantial revenue21.65 trillion, an increase of 20 in ten years.81%; net profit 2.9.9 billion yuan, with an annual increase of 2.37%; deduct non-net profit 2.65 ppm, downgraded to 0 ten years ago.42%; of which Q4 has a single quarter income of 5.61 ppm, an increase of 5 in ten years.65%; net profit is 0.7.4 billion, an increase of 8 in ten years.91%; net profit after deduction is 0.58 ppm, down 18 years ago.98%; it is proposed to pay 3 yuan (including tax) for every 10 shares.  Weak demand in Q4. The growth rate of income declined. The impact of changes in profitability on profitability: Q4 revenue growth slowed significantly earlier than Q3, mainly affected by Sino-US trade disputes. Some downstream industries (lighting, home appliances, etc.) snatched in Q3.As a result, weak demand for Q4 has dragged down revenue growth.In terms of profitability, Q4 single-quarter gross margin and net profit margin were 29.58%, 13.11%, Q1 in the single quarter decreased by 1.9, 2.The 55 single ones are reduced because the company ‘s Q4 production rate has decreased. In addition, the weak additional demand has also affected the company’s future pricing plans. At the same time, the raw material side remains at a high level, which reduces the company’s net interest rate.We expect that raw material prices may decrease and the company ‘s self-sufficiency rate will increase. After some of the downstream industries destock in the first quarter, demand may increase in the second quarter, boosting the growth of revenue and profitability while driving steady growth.  High-end products are gradually breaking through, steadily replacing and driving long-term development: Through the company’s solid capacitors (increased revenue by nearly 30% in 18 years), mass production of high-end products such as MLPC, the trend of breakthroughs in the high-end market has now emerged, and the gradual replacement of the Japanese system is the general trend.Look, although the market share of Japanese manufacturers is nearly 60%, but the main factories are local, the cost disadvantage is obvious, and the long-term profit pressure is prominent. It has gradually contracted to high-end areas such as communications, industry, and automobiles to stabilize profitability and has entered the strategy.During the contraction phase, the industrial transfer 成都桑拿网 brought large growth space to domestic leaders.The company also continues to break through new heavyweight customers and reduce the dividend ratio in 2018, laying a foundation for subsequent capital expenditures. The number of projects under construction has increased significantly, indicating that the company’s new factory construction has accelerated significantly. It is expected to be put into production at the end of 19, starting in 20 years.The expected contribution has increased significantly. In the future, the company’s further penetration in the fields of communication and industry is worth looking forward to.  The new production capacity is highly automated and continues to strengthen its core competitiveness.The company has its own equipment factory. The newly expanded production capacity of the five factories is all 杭州桑拿网 constructed in accordance with the latest automation standards. Based on the annual production capacity of 200 million units, the full staffing capacity is less than 300. The corresponding increase in per capita is larger and the existing capacity is more than doubled.Growth, and subsequently new factories were designed according to this standard. After commissioning at the end of 19th, revenues increased while labor costs decreased, and the profitability center promoted improvement.  Investment suggestion: Demand-side imported substitutes and supply-side capacity expansion drive the company’s long-term growth. We expect the company’s net profit in 2019/20/21 to be 3.60/4.69/5.83 trillion, EPS is 0.92/1.20/1.50 yuan, a growth rate of 20.3% / 30.1% / 24.5%, corresponding to PE of 22.6/17.4/13.9x, “Buy” rating.  Risk reminder: Low-expected progress in capacity release and low-end development in the high-end market.