Orient Securities: Gave Lyle Technology a buy rating with a target price of 30.34 yuan

2022-01-05 Orient Securities Co., Ltd. Pu Jian, Ma Tianyi, Tang Quanxi conducted research on Lyle Technology and released a research report "Functional Coating Film Leader, Downstream Innovation Brings Vast Development Opportunities", this report gives a buy rating to Lyle Technology, believing that its target price is 30.34 yuan, the current stock price is 23.42 yuan, and the expected increase is 29.55%.

Lyle Technologies (688683)

Core ideas

Functional coating film integration leader, benefiting from the synchronization of supply and demand. Focusing on the integration strategy of "adhesive film material + application", the company has been deeply cultivating the functional coating film industry chain for nearly 20 years, maintaining a leading position in terms of technical system, business model, product structure and product competitiveness, and fully competing with international manufacturers in the subdivision application fields such as FFC and LED flexible circuit board, while the new product reserves of high-tech barriers such as wafer process protection film and thermoforming process have growth potential. In the future, the company will benefit from the vigorous ecology of the downstream application market and the green process trend under the goal of "double carbon"; on the other hand, it will benefit from the opportunity of supply chain reshaping under domestic substitution, and grow from an explorer of new material applications for functional coating film in China to a leader;

Downstream technological innovation drives rapid growth in demand. With the continuous innovation of consumer electronics, semiconductors, new energy, automotive electronics and other fields in the 5G era, the continuous improvement of functional coating film and product process upgrades and demand, the market space potential is large. 1) The demand for electromagnetic shielding and glass enclosures for 5G mobile phones has increased, driving the company's demand for magnetic shielding adhesive film and glass process protection film. 2) The trend of high-definition and large-screen display has driven the volume and price of FFC to rise together. 3) LED linear lighting has broad prospects, and the company's LED flexible circuit board products have advantages in cost, environmental protection and efficiency. Adopt innovative technology and gradually gain market recognition. 4) When the domestic replacement of semiconductors is in place, the company increases the wafer process protection film, and large-scale mass production is imminent;

Embrace the era of new energy vehicles and energy storage. Driven by the pressure of energy conservation and emission reduction and the demand for performance improvement of new energy vehicles, the demand for lightweight vehicles has become prominent. FFC flexible flat cable has the characteristics of small size, thin thickness, good bending resistance, etc., which has an alternative effect on the traditional wiring harness of automobiles. With the two-dimensional growth of consumption and product technology, the market space for automotive FFC will continue to be released. In addition, the company recently announced the acquisition of Foshan Dawei into the field of carbon-coated aluminum foil, the main material of lithium battery fluid collection, and has established cooperation with major domestic energy storage and power battery manufacturers, and is expected to have synergistic effects with the company in terms of technology, business and customers while fully benefiting from the performance increase brought by the trend of new energy vehicles and energy storage.

Profit forecasts and investment advice

We forecast the company's earnings per share for 21-23 years to be 0.51, 0.80 and 1.20 yuan respectively, based on the average PE valuation level of 38 times the 22-year average of comparable companies, corresponding to a target price of 30.34 yuan, and the first coverage is given a buy rating.

Risk Warning

The risk of raw material price fluctuations, the market expansion of new products is less than expected, and the downstream demand is less than expected.

The Securities Star Valuation Analysis Tool shows that Lyle Technology (688683) has a good company rating of 3 stars, a good price rating of 1.5 stars, and a valuation composite rating of 2 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)