03

2023

-

07

Open source securities: copper-clad industry bottoming signal has now turned strong demand to push prices upward

Author:


Zhitong Financial APP learned that Kaiyuan Securities released a research report saying that the inventory of copper clad laminate industry has been completely depleted and the bottom of the industry appears: 1) the turnover days of the industry inventory belong to the low water level in the electronic subdivision sector; 2) The copper clad laminate industry has completed inventory de-stocking in 2022Q3; 3) The industry's growth rate has reached the low point of 2022Q3, and 2022Q4-2023Q1 continues to repair. 4) The price bottom has appeared. In addition, according to the Prismark forecast, 2023Q2 downstream PCB link single-quarter output value is expected to stabilize back to $19.1 billion, QoQ plus 5.9 percent, the bank believes that the downstream link demand boost will help the copper plate link continue to raise prices to repair profits and obtain excess profits.

The main points of view of Open Source Securities are as follows:

Copper clad laminate industry inventory has been completed to de-stocking, the bottom of the industry appears

(1) The inventory turnover days of the industry belong to the low water level in the electronic subdivision sector: the inventory turnover days of Shengyi Technology, Sanhuan Group, Jiejie Micropower and Zhaoyi Innovation 2018Q1~2022Q3 are 65~117/138~248/79~165/71~186 days respectively, and the minimum and maximum inventory turnover days of copper clad laminate industry are at the low level in the subdivision industry, moreover, due to the product characteristics of copper clad laminate that copper foil is easy to oxidize and difficult to store, the delivery time of manufacturers' orders is short, ranging from 0.5 to 1.5 months. (2) The copper clad laminate industry has completed inventory removal in 2022Q3: the inventory of leading copper clad laminate manufacturers fell first in 2022Q3, while MLCC and power devices are still on an upward trend. As the price of copper clad laminate in 2022Q3 fell, downstream PCB manufacturers mainly wait-see, (3) The industry's crop rate has passed the low point of 2022Q3, and 2022Q4-2023Q1 continues to repair: benefiting from the industry's low inventory and short order cycle, the industry's crop rate continues to rise in the process of terminal demand repair;(4) the bottom of the price has appeared.

The strong bargaining power of the copper-clad plate link determines that the loss is difficult to continue, and the price is expected to be corrected in the process of recovery.

Compared with the downstream PCB link, the copper clad laminate link has higher concentration and stronger bargaining power. In 2021, the market share of the global rigid copper clad laminate manufacturers is as high as 55%, while the concentration of the top five manufacturers in the PCB link is only 29%. As a relatively universal product, copper clad laminate has flexible pricing changes. When the downstream demand is booming, it is easy to bargain with the PCB link and obtain excess profits. However, PCB products have a single negotiation attribute, constrained by the processing time and the pace of orders, the transmission of prices to end manufacturers has a time lag. Since 2022Q3, the prices of copper foil, glass fiber and resin, the main materials of the three traditional copper clad laminates, have all risen. The cost pressure of raw materials has always been borne by the copper clad laminates with strong bargaining power. Referring to the 2022 performance bulletin disclosed by South Asia New Material and Huazheng New Material, it is estimated that the net profit of 2022Q4 Huazheng New Material and South Asia New Material in a single quarter is -0.12-0.006 billion yuan/-0.31-0.021 billion yuan, showing a loss, the gross margin of the PCB segment remains at a high level. The bank believes that in the process of demand recovery, the loss of copper-clad link is difficult to continue, the price is expected to be further revised, and the profits of all links in the industrial chain are facing redistribution. According to the Prismark forecast, 2023Q2 downstream PCB link single-quarter output value is expected to stabilize back to $19.1 billion, QoQ plus 5.9 percent, the bank believes that the downstream link demand boost will help the copper plate link continue to raise prices to repair profits and obtain excess profits.

The company's business model and product structure determine the flexibility of price increases for copper-clad laminates, and high-end material upgrades define the main line of growth.

The mode of large suppliers and scattered customers in the copper clad laminate industry will help copper clad laminate enterprises to raise prices, while the improvement of product structure and the increase of localization rate of emerging products such as high-frequency and high-speed, BT materials and ABF laminated adhesive films will expand the growth space of copper clad laminate enterprises and push up the ROE center of enterprises at the same time, thus further driving the increase of valuation center.

Beneficiary target: strong bargaining power of leading manufacturers and resonance of product structure upgrading: Shengyi Technology (600183.SH); Vertical integration manufacturer of upstream raw materials of copper clad laminate: Jiantuo laminated board (01888); Small customer orders are the main orders, and the product structure is biased towards traditional materials, with higher profit elasticity: Jin 'an Guoji (002636.SZ); Capacity release and breakthrough of some high-end products: Huazheng New Material (603186.SH), South Asia (68819.519.).

Risk Warning: Weak demand for downstream consumer orders, rising raw material prices, production line technology reform is not as expected.

This article comes from: Zhitong Financial Network.

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