Huagong Technology (000988): The epidemic has limited impact and will not change its long-term growth foundation

The impact of the epidemic is limited, and the industry trend solidifies the foundation for growth. We believe that the impact of the epidemic on the company is limited. It depends on the company’s pre-recording and epidemic prevention work before the rapid development of the epidemic. Therefore, the VMI inventory management mechanism guarantees the company’sNormal delivery during the period.

In the medium 都市夜网 and long term, we believe that the company’s main business of optical modules and laser equipment is expected to usher in good development opportunities driven by 5G commercial use.

Do we maintain the company 2019?
In 2021, the EPS will be 0.

51/0.

69/0.

80 yuan, maintaining a target price of 25.

53?

27.

60 yuan, maintain “Buy” rating.

The preliminary plan is sufficient, and the overall status of the company’s employees is relatively good. In response to the epidemic, the company has completed a large number of sufficient preliminary plans and established a strict health reporting system.

According to the company’s announcement, as of February 1, the total employees of Huagong Technology were 8,536, and only one employee working in Xiaogan area was diagnosed. Currently, the isolation and treatment are in good condition.

In addition, four employees suspected that they were currently observing at home and waiting for the results of nucleic acid tests.

On the whole, employees are in good condition.

Optical module business: Orders from major customers have not been affected, and preparations for production and operation restoration continue to advance. According to the company’s announcement, based on the Hubei Provincial Government’s request to start construction no earlier than February 13, the short-term internal impact on the company’s production and operation is 4?
7 days.
However, the delivery of orders to large customers has not been affected, and the reorganization benefits from the company’s sufficient inventory reserves years ago.

According to the company’s announcement, the company has built VMI warehouses and hub warehouses with major customers. It has nearly 200 million inventories in Shenzhen, which can guarantee a supply of about one month, which eases the company’s delivery pressure during the epidemic development year.

In addition, the company continues to promote the recovery of production and operation. According to the company’s plan, it is expected that it will reach 60% of the labor and production capacity on the day of commencement and 100% of production capacity one week later.

Laser equipment business: The epidemic does not change the upward trend of the industry, and 5G helps the industry boom. We believe that the company is one of the domestic laser equipment leaders. The related business ushers in two major development prospects. Therefore, the growth of the volume of 5G mobile phones will drive the boom in the field of laser processing equipment.Pick-up; subsidence, technological excellence, and cost reductions brought about by localization help laser equipment continue to penetrate other industries. Intelligent manufacturing and new energy vehicles will bring new opportunities to the industry.

The company has realized the integration of the industrial chain in the field of laser equipment, and its products cover different products such as high, medium and low power. It is expected to usher in a growth trend driven by the rebound of the boom.

Investment suggestion We believe that in the context of 5G commercial use, the company’s optical communications and laser equipment business will usher in good development opportunities.

We think the impact of the epidemic on the company is limited, on this basis we maintain the company 2019?
In 2021, the EPS will be 0.

51/0.

69/0.

80 yuan, maintaining a target price of 25.

53?27.

60 yuan, maintain “Buy” rating.
Risk warning: New pneumonia worsens than expected; downstream demand for laser equipment business is less than expected, competition in the telecommunications optical module market is intensified, and operating expenses exceed expectations.