Hudian: Leveraging on Huawei to achieve high growth, strong PCB market growth

At the symposium of scientists held on September 11, my country made it clear that it is necessary to persevere in strengthening basic research, clarify the direction and development goals of my country’s basic research field, increase investment in basic research, and provide necessary policy support in finance, finance, taxation, etc. Conducive to a sound scientific research ecology for basic research, establish and improve a scientific evaluation system and incentive mechanism, and continue to persist.
Combined with the “Several Policies to Promote the High-Quality Development of the Integrated Circuit Industry and Software Industry in the New Era” issued by my country on August 4, the country’s determination to develop the field of chips and basic computing power is not weak. Reflected in the market, Shanghai Electric Power (002463) took the lead in daily limit on September 17.
Huawei wins the dragon with its strength
The company has focused on the production of various PCBs for more than 20 years, and has formed a product structure dominated by corporate communication market boards and medium and high-end automotive boards; office and industrial equipment boards as a powerful supplement, which can be widely used in communication equipment, automobiles, and industries Equipment, medical equipment, microwave radio frequency and many other fields.
Hudian is one of the few domestic manufacturers with high-end communication board mass production capacity. With its excellent product quality, the company’s downstream customer structure is relatively concentrated. The top five customers account for about 70% of the revenue, which is mainly determined by the product track. The communication board Downstream customers are mainly communication equipment manufacturers. Huawei ZTE’s global market share is gradually increasing, so the customer concentration is relatively high and sales are relatively stable. At present, it has accumulated important customers such as Huawei, Cisco, and ZTE.
From 2018 to 2019, the growth of most sub-sectors of the PCB industry was generally hindered, but the business performance of the communication board was very flexible. In order to expand production capacity and improve the office environment, Shanghai Electric Power Co., Ltd. completed the relocation of its old factory in Kunshan in 2016. Since then, the company’s net interest rate at the parent company has continued to increase from 0.16% in 2015 to 16.92% in 2019. Specifically, Shanghai Electric’s revenue in 2019 increased by about 1.6 billion compared with 2018, of which the largest customer, Huawei, contributed 1.2 billion in growth.
Benefiting from the increase in gross profit margin and the decrease in the expense ratio during the period, the growth rate of net profit attributable to the parent company in recent years has been much higher than that of revenue. In 2019, the net profit attributable to the parent company was 1.206 billion yuan, an increase of 111.41% year-on-year. Under the impact of the epidemic, net profit attributable to the parent increased by 31.68% year-on-year to 214 million yuan, and the net profit attributable to the parent increased by 1.61 percentage points year-on-year to 13.53%.
Broad prospects for development
As mentioned above, from the perspective of the PCB market segment, the demand for infrastructure applications such as communications and servers is growing relatively fast, which will become the main driving force for future industry growth.
In 2019, the demand for infrastructure applications such as 5G, networks, and data centers continued to grow in 2018, with server and data storage output value of US$4.971 billion, a year-on-year increase of 3.1%; wired infrastructure output value of US$4.670 billion, a year-on-year increase of 6.2%; The output value of wireless infrastructure was US$2.612 billion, a year-on-year increase of 7.1%. As 5G communications enter the peak period of construction, infrastructure applications such as communications and servers in the PCB market segment will maintain rapid growth.
According to Prismark, the output value of the communications sector in 2023 is expected to be 23.896 billion U.S. dollars, and the expected compound growth rate from 2018 to 2023 is about 3.39%. Moreover, after entering the 5G era, the higher frequency of the frequency band used by 5G determines that the density of base stations is greater than that of 4G. As an important material for base stations, PCB will benefit from the increase in the number of base stations.
According to China Industry Information Network, the number of 5G base stations will be 1.1-1.5 times that of 4G base stations. It is also learned from the 5G Innovation Development Summit Forum held in Chongqing on the 15th of this month that my country’s 5G users currently exceed 110 million, and it is planned to have more than 600,000 5G base stations by the end of 2020, covering cities above the prefecture-level nationwide.
According to data from China Unicom and China Telecom Department, through joint construction and sharing in the past year, the two parties have opened more than 300,000 5G base stations. According to preliminary estimates, the two companies can save construction investment of over 60 billion yuan, basically realizing the shortest time and the least cost. 5G network coverage capacity is quickly formed, and 5G construction has entered a period of acceleration.
In addition, the upgrading of automotive product structure and the increase in the proportion of electronic costs are expected to bring about rapid development of the automotive electronics industry. The demand for PCBs for new energy vehicles is more than 5 times that of ordinary cars, and intelligent driving and autonomous driving are the future development directions. High-frequency PCBs, as a necessary material for millimeter-wave radar, will drive rapid growth in demand for automotive PCBs.
What is more noteworthy is that communication generation changes will drive the increase in demand for high-frequency/high-speed PCBs. Due to barriers such as technology research and development, capital investment, and certification time, leading PCB manufacturers will benefit even more. As the leader of domestic high-end communication boards, Future performance may maintain rapid growth.

Post time: Sep-19-2020