Incident: On August 24, 2022, China Porcelain Electronics released its 2022 semi-annual report. In the first half of 2022, the company achieved operating income of 633 million yuan, an increase of 28% over the previous year; net profit of Fumo was 78 million yuan, an increase of 37% over the previous year; net profit of non-Gumi was 66 million yuan, an increase of 20% over the previous year.
Incident analysis:
1. The performance is growing steadily, the financial situation is good, and the growth rate of overseas markets is fast. The company is deeply involved in the manufacturing industry of special electronic materials and specializes in R&D, production and sales of electronic ceramics series products. In the first half of 2022, the company achieved operating income of 633 million yuan, an increase of 28% over the same period of the previous year; net profit of the mother was 78 million yuan, an increase of 37% over the same period last year; net profit of the non-return mother was 66 million yuan, an increase of 20% over the same period of the previous year; and basic earnings per share was 0.37 yuan, an increase of 37% over the same period last year. By the end of June 2022, the company's financial situation was good, with total assets of 1,763 billion yuan, an increase of 14% over the end of the previous year; owners' equity attributable to shareholders of listed companies was 1,185 billion yuan, an increase of 5% over the end of the previous year. In addition, the company is actively expanding overseas business. Overseas market revenue and its share of total revenue grew rapidly. Overseas revenue reached 126 million yuan in the first half of the year, accounting for 19.84% of operating revenue, an increase of 44% over the same period last year.
2. The main business is stable, the business in the consumer electronics field is growing rapidly, and there is broad room for growth.
The company's electronic ceramic case business for communication devices grew steadily in the first half of 2022, with revenue reaching 471 million yuan, an increase of 25.22% over the previous year, accounting for about 74.45% of total revenue, the company's main source of revenue; consumer electronics ceramic cases and substrates doubled, with operating income reaching 950521 million yuan, an increase of 132.6% over the previous year, accounting for 15.01%; the revenue and share of electronic ceramic housings and automotive electronics for industrial lasers continued to decline. The company's main products in the consumer electronics field include sound meter crystal oscillator cases, 3D light sensor module cases, 5G communication terminal module cases, and aluminum nitride ceramic substrates. All products have significant technical advantages, broad application fields, and good development prospects. The company invested 85 million yuan in R&D in the first half of 2022, an increase of 35.04% over the previous year. Currently, there are a number of research projects in the field of consumer electronics; at the same time, it continues to promote the construction of production lines for consumer electronics ceramic products, further driving the company's consumer electronics business to usher in rapid growth.
3. Accelerate the acquisition process, expand the company's business structure, and improve the quality of the company's assets.
The company plans to purchase 73.00% of its shares of Bowei Company and the RF chip business assets and liabilities of Gallium Nitride communication base station radio frequency chip business from the 13 issued shares of China Telecom, with transaction prices of 1,904 billion yuan and 1,511 billion yuan respectively; it plans to purchase 94.6029% of Guolian Wanzhong's shares from China Telecom 13, Digital Light, Zhixin Internet, Telecom Investment, Capital Science and Technology Development, Shunyi Science and Innovation, and China Investment Tianjin. The total transaction price of the underlying assets is 3.831 billion yuan. At the same time, after paying the expenses related to this restructuring, the raised supporting funds will be used to invest in projects such as the construction of a precision production line for gallium nitride microwave products, the construction of a R&D center for communication power amplifiers and microwave integrated circuits, the construction of a third-generation semiconductor process and testing platform, and research and development of key technologies for silicon carbide high voltage power modules to further expand the company's business structure, improve the company's asset quality, and enhance the company's anti-cyclical risk ability, core competitiveness and profitability.
4. The upgrading of the electronic equipment manufacturing industry is accelerating, and the upstream and downstream electronic components are developing with high quality. The “Basic Electronic Components Industry Development Action Plan (2021-2023)” issued by the Ministry of Industry and Information Technology clearly states that it should target key markets such as smart terminals, 5G, industrial Internet, data centers, and new energy vehicles to promote breakthroughs in the basic electronic components industry and enhance supply chain support capabilities for key materials, equipment and instruments.
The company has independent intellectual property rights in the three core technology fields of key core materials for electronic ceramics and metallization systems, semiconductor shell design simulation technology, and key technology for high-temperature co-firing of multi-layer ceramics. It has pioneered the field of ceramic shell products for optical communication devices in China and broken the technology blockade and product monopoly of foreign industry giants. In the future, the company will pay close attention to the development direction of electronic ceramic shell technology, continue to improve R&D capabilities, and carry out continuous product upgrades and structural adjustments.
Investment advice:
As a leading high-tech enterprise specializing in R&D, production and sales of electronic ceramics series products in China, the company has strong technical advantages in new electronic ceramic materials, semiconductor shell simulation design, production processes, etc. We believe that the company will maintain high growth for a long time in the future. It is predicted that the company's revenue for 2022-2024 was 1,421/19.22/2,406 billion yuan, an increase of 40.20%/35.20%/25.20%. The company's net profit to the mother was 1.82/246/309 million yuan respectively, an increase of 49.67%/35.12%/25.51% over the previous year, corresponding to EPS 0.87/1.18/1.48 yuan and PE126.15/93.36/74.39, giving it a “recommended” rating.
Risk warning:
Acquisitions fell short of expectations; R&D progress fell short of expectations; products in the consumer electronics sector fell short of expectations; industry competition increased risks.
