Sanan Optoelectronics (600703): Fourth-quarter profit growth meets expectations Focus on compound semiconductor business progress
Performance preview remains neutral. Profit is expected to decrease by 45-55%. Sanan Optoelectronics released a performance forecast 北京夜网 on January 11. It is expected that net profit attributable to mothers in 2019 will decrease by 127,360-155,660 million compared with the previous period, a decrease of 45-55%.We expect (we expect net profit attributable to mothers to reach $ 1.4 billion in 2019, a 50% decline in one year, at the company’s median guideline).
At the same time, the company announced that the decrease in net profit after deduction of non-reduction decreased by 134,880-157,360,000 yuan, a year-on-year decrease of 60-70%.
We believe that the traditional LED is facing a significant decline in the biology of the door. For a leading company like Sanan, the capacity of new LED technology and the development of compound semiconductors are very important.
The traditional LED industry faces a significant reduction in the threshold of entry: The company stated in its performance forecast that the price decline of the first three quarters of the LED fluctuated, and the price gradually stabilized in the fourth quarter, resulting in 2019 prices and gross profit margins.Acceptance pressure erodes company performance.
We believe that after entering the market, China Micro Devices can provide second-tier and third-tier manufacturers with extremely cost-effective solutions, and capacity release is no longer one of the alternatives for the development of some small factories.
Therefore, without a great improvement on the demand side, there is always great pressure on capacity growth on the supply side, and upward price elasticity is limited.
At the same time, Sanan’s current inventory level is also a major hidden danger to the industry, and it is necessary to pay attention to the company’s inventory clearance situation.
New LED technology and compound semiconductors bring momentum to the company’s long-term development: We believe that for leading companies like Sanan, technology can bring dividends to the company’s growth, so we need to pay attention to the development opportunities of MiniLED and compound semiconductors in 2020.
We estimate that the company’s compound semiconductor revenue is expected to achieve rapid growth in 2020, reaching 1.2 billion US dollars, mainly due to the trend of import substitution.
As a leading domestic compound semiconductor company, the company is expected to take the lead in benefiting from the transfer of domestic customer orders.
Looking at the company’s existing three product lines, we are more optimistic about its layout of third-generation compound semiconductor gallium nitride and silicon carbide, and it is estimated that the total revenue will reach $ 900 million.
Estimates and recommendations The company ‘s recent widening fluctuations are mainly due to: 1) LED prices stabilized in the fourth quarter of 1919 and continued downward pressure was limited; 2) 2020 compound semiconductor business benefited from import substitution to achieve rapid growth.
We maintain our 2019 profit forecast and 2020 revenue unchanged, but slightly increase period expenses, resulting 重庆耍耍网 in a 5% reduction in net profit in 2020 to $ 1.8 billion.
The company’s current consensus corresponds to 44.
5 times 2020 price-earnings ratio.
We maintain our neutral rating and target price of 12.
00 yuan unchanged (39.
5% downside space), corresponding to 26 in 2020.
9 times price-earnings ratio.
We will give the latest profit forecast after the detailed financial data of the 2019 annual report is disclosed.
Risk LED non-first-tier manufacturers provide a significant contraction, resulting in a relatively balanced supply and demand relationship.