20210901-招银国际-晶盛机电-300316.SZ-Mega_order_intake_to_boost_earnings_in_2022E-23E_Raise_earnings_forecast_and_TP_5页_1mb

Zhejiang Jingsheng (300316 CH) Company Update Summary

Core Content and Key Highlights

Zhejiang Jingsheng (300316 CH) has announced a significant contract win with Ningxia Zhonghuan, a subsidiary of Zhonghuan (002129 CH), for the delivery of automated crystal growing furnaces valued at RMB6.08bn (VAT-included). This contract represents a 53% increase over the company's backlog of RMB11.5bn as of end-Jun 2021 and is expected to boost earnings for the years 2022E and 2023E.

The contract is a strong indicator of the solar capex growth trend, with Jingsheng being a major beneficiary of Zhonghuan's aggressive expansion plans. Zhonghuan plans to raise RMB9bn to finance 50GW of G12 monowafer capacity, with Ningxia Zhonghuan executing the project. The construction lead time is estimated at 15 months, which suggests the revenue will start contributing in 2022E.

Earnings Forecast and Target Price

CMB International Securities has revised up its 2022E and 2023E earnings forecasts by 17% for each year, reflecting the positive impact of the new contract. The Target Price (TP) has been increased from RMB77.50 to RMB112, indicating a +44% upside from the current price of RMB77.67.

Earnings Summary (YE 31 Dec)

YoY Growth

Valuation Metrics

The Target Price of RMB112 is based on a 56x FY22E earnings valuation, with an EPS CAGR of 56% from 2021E to 2023E, resulting in a 1x PEG.

P/E and P/B Bands

Financial Performance

Income Statement Highlights

• Core operating profit is expected to grow significantly, with a 20% increase in FY22E compared to FY21E.
• Pre-tax profit is projected to rise from RMB1,725mn in FY21E to RMB3,767mn in FY23E.
• Net profit is expected to increase from RMB1,484mn in FY21E to RMB3,238mn in FY23E.

Balance Sheet Highlights

• Total assets are projected to grow from RMB15,738mn in FY21E to RMB28,074mn in FY23E.
• Shareholders' fund is expected to increase from RMB6,559mn in FY21E to RMB11,574mn in FY23E.
• BVPS (Book Value Per Share) is forecast to rise from RMB5.09 in FY21E to RMB9.00 in FY23E.

Key Ratios

• Gross margin is stable at around 36%.
• Core operating margin increases from 25.2% in FY21E to 26.6% in FY23E.
• Net profit margin remains at 21.9%.
• ROE is expected to grow from 25.2% in FY21E to 31.7% in FY23E.

Risk Factors

1. Weaker or slower-than-expected solar power capacity expansion.
2. Lower-than-expected gross margin.
3. Unsuccessful acquisition.

Share Performance and Market Position

• Shareholding Structure: Majority ownership by Shaoxing Shangyu Jingsheng (48.28%).
• Share Performance: Positive returns over 1-month, 3-month, and 6-month periods.
• Market Cap: RMB99,850mn.
• Price Performance: 12-month price performance chart available.

Industry Outlook and Capacity Expansion

• CPIA estimates that large wafers (M10/G12) will account for 50% of the market in 2021, up from 2.5% in 2020.
• Major wafer manufacturers have announced capacity expansion plans, including:
  • Gaojing Solar: 50GW (2021)
  • Zhonghuan: 50GW
  • JYT: 24GW
  • JA Solar: 20GW
  • Canadian Solar: 10GW
• Total capacity expansion in 1H21 reached 184GW, with RMB54.5bn in investment.

Analyst Ratings and Recommendations

• CMBIS Rating: BUY.
• Potential Return: Over 15% over the next 12 months.

Conclusion

Zhejiang Jingsheng is well-positioned to benefit from the expansion in solar capacity and the increased demand for automated crystal growing furnaces. The new contract with Ningxia Zhonghuan, combined with its strong earnings growth and improved valuation metrics, supports the BUY rating and the revised Target Price of RMB112. The company's financial health, with increasing revenue and net profit, and its strategic alignment with major players in the solar industry, underline its potential for future growth. However, the analyst notes potential risks related to the solar capex slowdown, margin pressures, and acquisition success.