Sanlipo (002876): The display material becomes the leader of high-quality track polarizers.

50% of the production capacity of display panels is transferred to mainland China, and polarizing plates will become the best investment track for display materials: display panels are undergoing the third industrial transfer from South Korea and Taiwan to mainland China, taking advantage of manufacturing cost advantages and supporting the industrial chain.We believe that the transfer of display panels will bring investment opportunities for display materials.

From the perspective of the market size and localization rate of various types of materials, we believe that the industry space is close to 20 billion, and polarizing plates with localization rate of less than 10% are expected to become the best investment track.

While localization of small-size polarizers is being carried out, large-scale replacement of large-size polarizers for television is about to start: At present, the supply of small-size polarizers is mainly concentrated in Japan’s Sumitomo Chemical, Nitto Denko and South Korea’s Samsung polarizers.Therefore, the rise of domestic mobile phone brand manufacturers, domestic polarizer leader Sanlipo, using product cost-effectiveness and localized service advantages, is realizing the replacement of small sizes. After the large-scale panel production capacity is gradually transferred to China in the next three years, the replacement of large-size polarizersWill be fully open.

In Q3 2019, the inflection point of Sanlip’s performance appeared. Next year, the large and small size polarizer business volume will help the company’s long-term 深圳spa会所 growth: in the third quarter of this year, the company’s small size polarizers are in strong demand, which will help expand Hefei’s production capacity, and the small size profitability will improve significantly.Drive company gross margin from 5 in Q1 2019.

3% increased to 20% of Q3.

In 2020, the two large-size polarizer production lines in Hefei will enter the peak production period, and the Longgang 1490mm small-size polarizer production line will be mass-produced in the second half of next year. It is expected that the performance will enter a stage of sustained high growth. We expect the company’s revenue CAGR to reach 550%, EPS CAGR will reach 71% investment proposal and next year South Korea’s Samsung Display and LGD will withdraw some excess capacity, the display panel industry supply and demand layout will significantly improve, the industry supply and demand ratio will replace 20% in 2019 and drop to 8% in 2020The industry is expected to enter a new cycle of high prosperity.

As the upstream raw material manufacturer of the panel, the company will gradually realize the maximum release of new production capacity in the next 5 years, and its performance will enter a period of rapid cashing. Next year, the company is expected to usher in a stage of “industry return” and “company performance”, and gradually achieve “Davis double-clicks. ”

We use the price-earnings ratio method to give the company a target price of 78 yuan in the next 6-12 months, compared with 2020 2.

The 24 yuan EPS, the pro forma P / E ratio is estimated to be about 22x, and the first coverage gives a “buy” rating.

  Risk reminder: Because the cost of raw materials accounts for more than 70% of the cost of polarizers, and most of the company’s raw materials are purchased in Japanese yen, changes in currency exchange rates will have a disruptive effect on the company’s costs; in the future, the company’s new production line will be gradually put into production.The introduction of products may be less than expected, which may affect profitability; the intensified competition in the industry may cause the price of polarizers to decline, affecting the company’s performance; the company’s equity quality deposit ratio will rise, and approximately 27% of the original stock may be lifted from the taboo risk in May 2020; the risk of inventory price decline.