Downstream PCB net profit +29%, revenue growth at a moderate rate

In the first half of the year, the overall revenue growth of the upstream and downstream PCB plate was 12.5%, and the net profit growth of 16% returned to the mother was mainly due to the following reasons: the downstream demand remained stable, including the new server demand is strong, the demand of the pen TV market has picked up, and the demand for individual segments of the automotive market is strong (such as PCB for car lights); PCB enterprises orderly expansion, efficient production capacity has been released; Among them, the profit of downstream PCB enterprises increased by nearly 30%. The new flexible automated production line has improved production efficiency, and when the downstream demand is stable, the exchange income is superimposed, and the profit margin of PCB enterprises has increased by 1.4 pct year-on-year.

The profit margin of downstream PCB, upstream raw materials and equipment is improved, and the profit margin of midstream CCL is under pressure

2018H1, year-on-year, the overall gross margin of the sector (overall method) decreased by 1.4 pct, of which the upstream equipment and raw materials sector gross margin decreased by 2.6 pct; The gross margin of CCL segment (including Kingboard 1888.HK) decreased by 4.3 pct due to high raw material cost pressure and lower product prices; The gross profit margin of PCB segment was flat, mainly because of the higher production efficiency of new capacity, the reduced pressure on the cost side, the gradually high-end product structure hedged the depreciation brought by the expansion of production, and the reduction of the capacity operation rate.

The net cash ratio improved significantly, and the cash flow continued to improve

The cash/operating income of the sales of goods and the provision of labor services has been generally stable in the past two years, and the PCB plate has a faster rate of converting revenue into cash in various segments. The turnover rate of accounts receivable has been on the rise in the past two years. The figure is usually higher in the second half of the year than in the first. The net cash flow from operating activities/net profit of the whole sector improved significantly in 2018H1. Usually, the cash flow of the sector was more abundant in the second half of the year, but the net cash of the PCB and CCL sectors exceeded 0.9 compared with the first half of the year. In the past few years, the net cash ratio of each sector has been above 1.

Good companies are in a contrarian growth cycle

Shenghong Jingwang Chongda these three companies 2016H1-2018H1 these five semi-years, revenue is not strong quarterly growth season, in the economic growth slowdown, the downstream demand stable period is particularly difficult. In terms of fixed assets, Jingwang invested a large amount in 2014, and has steadily increased every year since then, making it the enterprise with the highest return on investment. Chongda made a large investment in 2014/2017, and the investment cycle and rhythm of this company are obvious, which can be inferred that 2019 is a big year for the company (Zhuhai project, consistent with the facts); Shenghong is a rapidly growing enterprise in the past two years, and 2017 is a big year for the company's investment. In terms of the new rate, Jingwang is relatively low, Shenghong and Chongda are relatively high, because the investment cycle of these two companies is shorter than Jingwang, and the intensity is slightly larger.

(News source: Liu Xiang Electronic Research)