PCB corporate profits are very sensitive to product prices, the price rise cycle, corporate profits will be substantially increased. From the global PCB industry supply and demand in the next two years, demand will rapidly increase, while the supply is very limited expansion of the situation that may arise in the next two years, PCB industry, tight balance between supply and demand may occur. Into the PCB is expected to rise in the price cycle, PCB industry, the arrival point in time investments.
The key assumptions and profit forecasts: We assume that in 2010, 2011 PCB prices rose 5%, 6%, CCL prices rose 10%, 12%; assumed in 2011 the company added 120,000 square meters second HDI production capacity, the next two years, PCB Gross margin was 24%, 26%. We are temporarily not consider the companys touch-screen effect from 2009 to 2011 earnings per share were 0.26,0.40,0.56 yuan. Performance of the companys gross margin is very sensitive to the PCB, we measured result is an increase for every percentage point margin, EPS increase 3 cents.
Valuation and investment recommendations: 2009 to 2011 earnings per share were 0.26,0.40,0.56 yuan, corresponding to dynamic price-earnings ratio for the 35,23,17 times. We believe that the companys existing business has a margin of safety, while the touch-screen operations may enhance the companys valuation, giving the company the "Recommended" investment rating.
Risk Warning: PCB industry is a cyclical industry, is closely related with the global economy. If the economy is the second bottom, demand declined again, it will have a major impact of our assumptions will have a major impact on the performance of the company.