Company Profile

Guangdong Silver Age Sci & Tech Co., Ltd. develops, produces and sells modified plastics, and providesrelated technical services. The Company's main products include fuel resistance materials, weatheringmaterials, toughening materials, plastic alloy materials and environmental protection durablematerials. (Source: Bloomberg)

Comment

Silver Age (the company) expects to maintain steady performance in modified plastics sector.In China, plastic steel only accounts for 30% of the whole market, and the modification rate isonly 16%, which are both lower than the averages of developed markets. Thus we believemodified plastic still has large room to grow in China. Also, the relative low oil price helps tomitigate company’s costs and improve company’s return.

Silver Age plans to purchase 100% of SinCoo and benefit from the robust growth of CNC industryFull-metal shell has obtained widespread use after iPhone employed a full-metal jacket.According to the handset’s best seller list of December 2015, all of the most popular cellphones are made of full-metal cover. The extensive adoption of full metal cover has boosted thedemand for CNC metal structure components, which has outstripped its market effectivecapacity. After turning SinCoo into its wholly-owned subsidy, Guangdong Silver Age will have“modified plastic + CNC structural component” as its two major businesses and enjoy the fastexpansion of CNC structure component industry.

LED lighting and 3D printing shall uncap future market for Silver Age

Dongguan Silver Age Optoelectronics Sci. & Tech., controlled by Guangdong Silver Age, isengaged in R&D, manufacturing and distribution of LED lighting, it has obtained itself a room inthe supply chains of Philips and OSRAM and expects to see continuously expanding salesvolume in the future. Silver Age Optoelectronics has also seen emerging returns from its earlyinput in the 3D-printing supplies segment, which may become another main income driver forthe company as the industrialization of 3D-printing being underway.

Earnings forecast and investment grading:

Guangdong Silver Age Sci & Tech is a leader among domestic modified-plastics manufacturers.Benefiting from the low oil price, the overall income of company’s modified plastic businessenjoys significant improvement. The company stepped into CNC structure component industryin 2014 by establishing Sincoo, and has enjoyed the industry prosperity since then. Also, theengagement of company’s subsidy in LED lighting industry and company’s early preparation in3D-printing technologies are expected to contribute steadily growing sales volumes and a newgrowth driver for income.

Excluding the impact from acquisition of SinCoo and from its related financing activities, weestimate Guangdong Silver Age to report its EPS for year 2016/2017/2018 at CNY0.41/0.65/0.77. We give “Outperform” rating for the company for the first time.

Potential risk: demand for modified plastics plunges or the promotion of 3C metal shell isweaker than expected.