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Copper foil price increases affect PCB industry chain

  According to the China chemical and physical power industry association, the price of raw materials such as copper foil, electrolyte and other lithium batteries has risen significantly, with some products gaining 55%. At present, the price effect of copper foil has been transmitted to the copper-clad board and printed circuit board (PCB). The price increase of the relevant companies is 5% to 20%, and the cost pass-through is smooth, showing the improvement of the supply and demand relationship between the PCB industry.
  Industry insiders say that the double-digit annual growth rate of the multi-segment industry represented by automotive electronics shows that demand for the PCB sector is picking up and entering a new cycle of business cycles. And copper foil prices for copper clad with PCB manufacturers to bring new pricing, high-end copper clad leading enterprises and PCB suppliers will expand the profit space, in the process of the cost for elastic enhance performance. The rise in copper foil prices in history has led to a rise in corporate gross margins of copper and PCB companies, and the share price of related companies has surged 3-5 times.
  Jin anguo: copper plate subdivision, the largest benefit of PCB supply and demand relationship improvement
  Copper clad leading segment, the biggest benefit from PCB supply and demand relations improve l upstream electrolytic copper foil into raw materials rise in price cycle, tension between supply and demand until at least 2018 2015 lithium battery market lasts hot drive the upstream lithium electricity copper foil by a sharp increase in demand at home and abroad about 20% copper foil big capacity was transferred to the lithium electricity copper foil, copper foil CCL and PCB in supply, the supplier have rise in price, more than 30% of the (estimate), to have the bargaining power of the copper clad CCL tap new pricing opportunities. Due to high technology barrier, high investment cost and long delivery cycle of core equipment, copper foil supply shortage is expected to last until at least 2018.
  Automotive electronics, communications industry downstream demand new growth engine for PCB industry: in recent years, along with the automobile electronic, new energy vehicles, small spacing LED, high-end servers, small stations such as growth in the field of rapid development, PCB, profound changes have taken place in the downstream application market, demand for PCB in the industries to achieve double-digit annual growth, PCB industry as a whole, entering a new cycle, will be substantial boost copper clad and PCB product demand.
  Benefit segmentation of Jin Anguo ji for copper clad laminates, PCB upstream and downstream of supply and demand relations improve, will meet the elastic enhance performance: in the company for the copper clad plate segments absolute leading (thick plate in the city for more than 70%), have differentiated competitive advantage, in recent years, the continuous extension of capacity, scale appeared gradually, the total output of copper clad and basic to keep more than 20% of the total sales growth, and gross margin continued ascension. Benefiting from the improvement of PCB supply and demand, the company will successfully pass on the cost to achieve the performance resilience. In addition, the exploration of industries such as big health is expected to add new growth points and bring value flexibility.
  Company for the niche of domestic copper clad laminates (copper clad in the thick), customer groups scattered, bargaining power is strong, under the background of PCB industry chain upstream and downstream supply and demand of improving, more will be transferred to the downstream cost price pressure and get higher profit space, future profitability is expected to continue to ascend. The company‘s net profit for 2016-2018 is expected to be 2.6/5.2/710 million, and EPS of 0.36/0.71/0.97 yuan respectively, and the current share price of PE is 56/28/21X respectively.
  Sheng yi technology: copper foil price increases downstream, copper plate price increase will continue
  Power battery caused by the shortage of copper foil copper foil with lithium electricity prices have to downstream copper clad industry, domestic copper clad leading raw yi science and technology also in recent price increases, but the market opposite the influence of profit increase and sustainability is still controversial.
  The price increase is not only the upstream cost pass, but also the supply and demand: historically, the yield of the raw and beneficial technology has fluctuated wildly, having hit the bottom in 4Q09, due to the collapse of demand caused by the financial crisis. At the peak of 2Q10, the main benefit is that the downstream consumer electronics and communication are in the golden development period, and the replenishment of the stock peak comes after the financial crisis. In 1Q16, the profit margin climbed to a record 20.8 percent, in part because of the lower cost of copper last year, which had accumulated about four months of supply. Is on the relationship between supply and demand on the other hand, copper foil lithium electricity demand for PCB with copper foil supply form the extrusion, and PCB remain stable, the downstream application demand did not reduce, copper clad factory bargaining power to ascend.
  60% of the products can pass the cost on raw interest, is expected to become the upstream prices beneficiaries: the existing situation of supply and demand, price advantage and ability of copper-clad r.p. panel manufacturers, but after the balance between supply and demand, may need to self digestion costs rise. At present, sheng yi focuses on the production of medium and high-end copper plates. The downstream has low price sensitivity, and the price increases can be higher than the competitors, and 60% of the products can be transferred out of the price. The upstream copper sheet has been up about 20 percent since the beginning of the year, while copper foil accounts for only 20 to 30 percent of the cost. Therefore, if the price increase exceeds 5 percent, it will benefit. According to supply chain feedback, sheng yi technology raised the price in August, the price increase is 3 ~ 8%.
  The automobile electron drives the long-term demand stability of PCB and expands the production capacity gradually. In the downstream of PCB, the demand of consumer electronics industry is expected to remain stable. Communications will benefit from the 4G replacement demand, which will remain stable. And the car electronics benefit from the intelligent demand PCB usage increase significantly. According to the CCLA, the demand and output of copper foil for 70 m in 2015 increased by 16 per cent year-on-year, while 70 m thick copper foil was mainly used in cars. In 2015, the company‘s production capacity reached 73.5 million square meters of copper plate and 12,000 square meters of adhesive tablets, and the capacity utilization rate remained high (guangzhou sheng yi was on average 90% + per year). Company following the Midwest expansion in 2013, expansion of production capacity in the east began last year, this year will be gradually in the ground, is expected to be completely reaches producing in 2018 (increase annual output of 1100 square meters of copper clad and 2400 square meters of bonding sheet).
  Valuation and suggestion: maintaining the profit forecast, raised its target price to $16 (+ 17%), corresponding to the p/e ratio of 33 2016 x, valuation up reflect the trend of industry price than expected, good competitive environment, the profitability improvement.
  Risk: 4G progress continues to be lower than expected; The expansion of production schedule exceeded the industry supply.
  Shanghai shares: revenue growth fast lane
  In the first half of 2016, the company reported revenue of 18.54 billion, which is the same as the growth of 12.66%. The net profit was 0.3 billion yuan, a year-on-year turnround. In the first three quarters of 2016, the net profit is expected to be 50 million to 80 million.
  The communication board has entered the fast lane of growth, and the car board has maintained high growth: the communication board sector, which has revenue of 1.19 billion in the first half of the year, is up 12.3% year on year, and the gross profit rate is 14.2% compared with 4% in the same period last year. The main reason is that as the new plant of the company kunshan and huangshi new plant gradually put into production, the old factory of kunshan moved to completion late last year, and the profitability of the company,, gradually recovered to its historical level. In the first half of the year, the car plate sector, with a year-on-year growth of 18.4% and a gross margin of 18.3%, rose by 0.6% compared with the same period a year earlier. With the increase of automobile electronic rate; New energy & electric vehicle penetration acceleration, automobile demand for PCB board is on the rise, and the company‘s auto board business is expected to continue to benefit.
  In the wake of new energy vehicles & development trend of intelligent vehicle, car PCB product volume period: the company‘s new energy car battery management system (BMS) with PCB has entered a stage of small batch production, which can be completely production next year. The incremental PCB value of the new energy vehicle is about 500 yuan, compared with nearly 50% for traditional cars. The car 24GHz hf radar has been certified by PCB and is expected to be produced in the fourth quarter of this year. The company cooperated with Schweizer in RFPCB, and Schweizer became the exclusive distributor of RFPCBs products in Europe. Schweizer‘s RFPCB global market share is 30%, and working with Schweizer will help the company to quickly open the RFPCB business.
  5 g blessing, communication PCB is expected to meet "second life" : although the effects of 4 g base station construction is slowing demand communication board, but 5 g times, short distance high frequency band application promotion, is expected to further enhance base station density. 5G construction is being advanced rapidly around the world, and the 5G standard is expected to be completed in 2018, with the company‘s communication board or new impetus for development.
  Profit forecast and investment advice: it is estimated that the company‘s net profit will be 120 million, 210 million and 310 million yuan in 16-18 years, with EPS of 0.07, 0.13 and 0.19 yuan. In view of the rapid development of the company‘s automobile business, the profitability of the communication business has stabilized, and it has entered the fast lane of revenue growth, giving the company 50 times of PE for 17 years and 6.32 yuan for the corresponding target price.
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