TD Optics (002632): Reflective Materials Business Prospects Positive for First Coverage Buy

TD Optics (002632): Reflective Materials Business Prospects Positive for First Coverage Buy
TD Optics is a domestic company specializing in the sale and production of reflective 成都桑拿网 materials.Reflective materials are mainly used for road / highway traffic signs, car number plates and reflective safety clothing.Mainly driven by the increase in road / highway construction projects, the potential market size of reflective materials has steadily increased, but we see that more than 80% of them come from repeated renewal requirements.We expect that TD Optics will achieve a compound annual growth rate of 25% / 28% in 2018-21, benefiting from the company’s gradual increase in market share in the field of high-end microprism reflective films and automotive license plates. The driving factors include: 1) Competitive product pricing (15-20% lower); 2) Recently, end-customer interest in domestic suppliers has risen when Sino-US trade relations are strained; 3) The company has taken measures to improve brand awareness and product 杭州桑拿 performance.The stock is currently expected to correspond to 12 times the 2020 expected price-earnings ratio, and then listed since the historical average of 17 times.Considering the expected attractiveness, growth prospects and potential gains we have a 12-month target price of 8.The growth space of 30 yuan is 29%. For the first time, we covered the stock’s budget purchase. Excellent product quality will drive growth. At present, TD Optics’ business focus is tilting from low-end interference applications to high-end reflective films (microprisms and glass beads), which means that gross profit margins will rise.We believe that TD Optics will achieve market share growth in this business area with its more than 8 years of experience in the development of microprism-type reflective films and significant progress in winning orders for domestic automotive license plates.We expect the company’s microprism reflective material market share to rise from 20% to 20% by 2021.