Essence Securities: Gave Hongli Zhihui a buy rating with a target price of 17.89 yuan

2021-10-28Ma Liang of Anxin Securities Co., Ltd. conducted a study on Hongli Zhihui and released a research report "Significant growth in the third quarter performance, with the help of Mini LED to achieve a breakthrough", this report gives a buy rating to Hongli Zhihui, believing that its target price is 17.89 yuan, the current stock price is 11.78 yuan, and the expected increase is 51.87%.

Hongli Zhihui (300219)

Event: On October 27, the company released the third quarterly report, Q3 single-quarter operating income of 1.057 billion yuan, an increase of 36.09% year-on-year, net profit attributable to the mother of 0.75 billion yuan, an increase of 214.78%; operating income of the first three quarters of 3.061 billion yuan, an increase of 45.28% year-on-year, net profit attributable to the mother of 217 million yuan, an increase of 242.35%.

LED market demand picked up, production capacity was gradually released, and the performance growth was obvious. 2021 the global economy recovered slightly, LED market demand picked up, according to the semi-annual report disclosed, the company in 2020 layout of the expansion capacity has been effectively released, LED semiconductor packaging growth is obvious, the company according to market demand gradually expand the scale of production, while fully integrating internal resources, optimize the main business structure, increase technology research and development efforts, revenue and profits have increased significantly. During the reporting period, the company achieved operating income of 3.061 billion yuan, an increase of 45.28% over the same period of the previous year, gross profit margin of 22.24%, an increase over 2020, and net profit attributable to the mother of 217 million yuan, an increase of 242.35% year-on-year, and the performance growth was obvious.

Expanded mini LED packaging capacity to improve the company's profitability. The company has been at the forefront of domestic LED industry technology, focusing on the research and development of Mini/Micro LED semiconductor display technology. According to the semi-annual report, the company Mini LED phase I project has been successfully put into production and provide mass production for domestic mainstream manufacturers, Mini LED phase II project construction work has been fully started, the total construction area of the second phase of the project is nearly 178,400 square meters, the annual output value is expected to reach 4 billion yuan after full production, according to the company's August 26 investor relations activity record sheet information disclosure, the company's overall gross profit margin in the first half of the year was 22.56%, Mini LED gross margin of about 40%, with Mini LED The successful commissioning of the first phase of the project and the re-addition of the second phase of construction will directly enhance the company's profitability and market competitiveness.

Adhere to enhance scientific research capabilities and strengthen the company's core competitiveness. The company has been focusing on the research and development of LED-related fields and the construction of technical teams, through the construction of intellectual property system certification, and has mastered a number of core technology patents related to the field of LED packaging. According to the semi-annual report, the company has won the China Patent Excellence Award, the First Prize of Science and Technology of Guangdong Province, and the Quality Award of the Mayor of Guangzhou. In January 2020, the project "Key Technologies and Industrialization of High-Efficiency And Long-life Semiconductor Lighting" participated in by the company won the first prize of the 2019 National Science and Technology Progress Award issued by the State Council of the People's Republic of China. The company currently has three nationally recognized CNAS laboratories, and one of which is an ENERGY STAR laboratory authorized by the U.S. EPA, and the semi-annual report discloses that the company has a total of 797 valid patents, including 131 invention patents

Investment proposal: We expect the company's revenue from 2021 to 2023 to be 4.28 billion yuan, 5.35 billion yuan and 6.688 billion yuan, and the net profit attributable to the mother is 302 million yuan, 392 million yuan and 541 million yuan, respectively, maintaining the "buy-A" investment rating.

Risk Warning: The industry boom is less than expected; the expansion is not as expected; the market development is not as expected; the product research and development is not as expected.

In the past 90 days, the stock has been rated by 4 institutions, 3 buy ratings and 1 overweight rating; the average target price of institutions in the past 90 days is 20.14; the Valuation Analysis Tool of Securities Star shows that Hongli Zhihui (300219) good company rating is 2.5 stars, good price rating is 1.5 stars, and valuation comprehensive rating is 2 stars.