Hangjin Technology (000818) 2020 First Quarterly Report Preview Comment: Electronics and Chemicals Double Wing Layout Military-civilian Integration Opens Space

Hangjin Technology (000818) 2020 First Quarterly Report Preview Comment: Electronics and Chemicals Double Wing Layout Military-civilian Integration Opens Space
Company dynamics On January 15, the company issued a notice for the first quarter. It expects to make a profit of 98 million to 130 million yuan during the period, expanding its growth by -11.05% -17.99%.Among them, the integrated circuit segment is expected to achieve a net profit of 38 million to 45 million yuan, an annual increase of 52.67% -80.80%; the chemical sector is expected to achieve net profit of RMB 60-85 million, a quarterly decrease of 30% -0%. Matters Comment The company realized the “electronic + chemical” double-wing layout. The company’s traditional business is the production and sales of chemical products. The main products include caustic soda, epoxy resin, polyether, etc.In the second half of 2017, the company acquired Changsha Shaoguang and Waco Electronic Integrated Circuit Company, and entered the electronics business from GPU, FPGA, high-frequency materials, and RF modules.In 2020, the company will take a stake in Wuhan Navigation Academy, which will further transform the company from the Beidou navigation field.Combined with the 2019 performance forecast, we expect the company’s electronics business-related profit in 2019 to approach 1.800 million, business beyond the chemical sector.  The company’s GPU localization of ground-throwing sound, high-frequency and high-speed materials together helped the 5G feast. The company’s current electronic field layout mainly includes “Changsha Shaoguang” and “Wike Electronics”.”Changsha Shaoguang”成都桑拿网 was formerly known as the state-run No. 4345 factory, and was founded in 1960. It has made outstanding contributions to the development of national weapons and equipment by relying on microelectronic products.”Changsha Shaoguang” developed the first- and second-generation graphics processing chips in 2014 and 2016 respectively. In December 2019, the company won 59.8 million GPU orders, and its application areas covered weapons and equipment and party and government agencies.The “Weike Electronics” business mainly includes high-frequency materials and devices, high-power power modules and thick-film integrated circuits.”Weike Electronics” has achieved domestic breakthroughs in the field of high-frequency materials. Related materials and radio frequency devices are suitable for 5G communication equipment. In the future, domestic alternative markets will be broad.  Beidousan Commercial Precise Company, the company’s precision card company, announced on January 5 that it paid 40 million yuan in cash to participate in Wuhan Navigation Academy10.67% equity.The leaders of R & D in Wuhan Navigation Academy include Academician Liu Jingnan, a leading fighter in Beidou navigation field, and Han Shaowei, a candidate for the Thousand Talents Plan.According to the “National Satellite Navigation Industry Medium- and Long-Term Development Plan”, the size of the satellite navigation industry will exceed 400 billion in 2020, of which Beidou 3 will complete global networking this year, and the Beidou navigation industry chain will further grow rapidly.Significant progress has been made in the Beidou 3 baseband RF integrated chip developed by Wuhan Navigation Academy. After the batch streaming, it will bring explosive business development opportunities to Wuhan Navigation Academy.We believe that the company started Wuhan Navigation Academy to participate in the shares before the completion of the Beidou 3 network. In the future, it will not rule out further enhancement of control and synergy between the Beidou 3 business and its own channel advantages.  Earnings forecast and estimation We expect the company to achieve operating income in 2019-2021.1.3 billion, 44.8.1 billion, 51.80ppm, with annual growth of 2 respectively.30%, 14.50% and 15.60%; net profit attributable to shareholders of the parent company is 3.2.1 billion, 4.5.1 billion and 6.10 billion yuan; EPS are 0.47 yuan, 0.65 yuan and 0.87 yuan, corresponding to 45X, 32X and 24X PE.In the next six months, the first coverage will be given to the “overweight” rating. Risk warnings (1) The development of next-generation GPU products is less than expected; (2) The 5G civilian business development is less than expected.