Huagong Technology (000988): Subsidiaries increase investment to create new growth poles

Huagong Technology (000988): Subsidiaries increase investment to create new growth poles

Subsidiary increased investment to create new growth pole The company issued an announcement on the evening of the 26th. The subsidiary Huagong Image plans to use its own funds of 65.29 million to expand production of new holographic anti-counterfeiting packaging materials related businesses. The subsidiary Huagong Laser plans to invest $ 100 million in new construction.The plant is also leased to Huagong Zhengyuan, a subsidiary of Huagong Technology, for its smart terminal business development needs.

We believe that the increase in expenditure of subsidiaries is expected to create new growth poles based on the optical module and laser equipment business.

We expect company 19?
The 21-year EPS is 0.

51/0.

69/0.

80 yuan, maintaining a target price of 24.

15?

twenty four.

84 yuan, pre- “Buy” rating.

10G PON is a crossover for the upgrade of fixed broadband from 100M to Gigabit Ethernet. After years of development, 10G PONSOC chips have been ASIC-based. Manufacturers represented by Hisilicon and Broadcom have mass production capabilities.

On the demand side, the Ministry of Industry and Information Technology issued the “Gigabit City Construction Index System” to accelerate the construction of Gigabit broadband.

According to the company’s forecast, the domestic market demand for 10G PON related products will reach 3 million units in 2020.

In addition, it also benefits from greater growth. Intelligent routers have replaced ordinary routers in advance. The company expects that operators will increase the collection of intelligent routers by 2020, so that the total demand will reach 40 million units.

We believe that the investment expansion of this subsidiary will help solidify the foundation for growth.

The prosperity of holographic anti-counterfeiting packaging materials is expected to improve. The subsidiary’s investment in expanding production will help the business grow. In 2018, the company’s holographic anti-counterfeiting business achieved total revenue3.

2.9 billion, with a revenue share of 6.

29%, the business gross margin reached 54.

20%, gross profit ratio is 13.

83% is a business with sustainable profitability.

According to this announcement, the company expects to gradually transform and upgrade its downstream customers’ strategy, and the demand for emerging holographic anti-counterfeiting packaging materials related products in the holographic anti-counterfeiting business is expected to increase.

On this basis, Huagong Image, a subsidiary of the company, plans to invest 65.29 million in 杭州养生会所 its own funds to expand production for new equipment purchases and workshop renovation needs.

We believe that if this expansion is carried out smoothly, it is expected to help the company’s holographic anti-counterfeiting business grow.

5G helps optical communications and laser equipment business meet development opportunities 5G commercial is imminent. Through the construction of 5G networks and the increase of 5G smart terminal penetration, the company’s main optical communications business and laser equipment business will usher in development opportunities.

In terms of optical communications business, we estimate that the total domestic demand for 5G front-end optical modules will be approximately 10.8 million in 2020 (approximately 3 million in 2019). The company’s 5G front-end optical module products are rich in product types and capacity expansion continues to advance.

In the laser equipment business, the growth in the expansion of 5G mobile phones is expected to drive the demand for laser processing equipment, transform new energy, and intelligent manufacturing will also bring new demand.

The company realizes the integration of the industrial chain in the field of laser equipment, and its products cover different products such as high, medium and low power, and are committed to sharing the industry’s growth dividend.

Investment suggestion We believe that the investment expansion of this subsidiary is expected to create a new growth pole for the company based on the optical communication and laser equipment business.

We expect company 19?
The 21-year EPS is 0.

51/0.

69/0.

80 yuan, maintaining a target price of 24.

15?twenty four.

84 yuan, pre- “Buy” rating.

Risk warning: New project industry demand is less than expected, and new project expansion is less than expected.