[Matters]
The company recently disclosed an announcement regarding the use of overraised capital to invest in CCS and FPC module construction projects for power batteries and energy storage battery systems. In order to seize the market opportunities for the rapid development of the NEV industry and energy storage industry, help the company expand from the consumer electronics field to the CCS and FPC module field for NEV power batteries and energy storage battery systems, and enhance the supporting capacity of the industry, the company plans to invest a total of 565 million yuan, of which it plans to use overraised capital of 167 million yuan (including financial gain) from the initial public offering of shares. The construction cycle of this project is expected to be 36 months. After the project is completed, the company will add production capacity of 12 million CCS modules and 39 million FPC modules per year.
[Comment]
CCS and FPC solutions have become mainstream solutions for new energy vehicles. FPC (flexible circuit board) is a printed circuit made of a flexible insulating substrate. It plays the role of conduction and transmission in electronic products. It has performance advantages such as high wiring assembly density, good bending, and weight reduction. In the field of new energy, especially in battery systems, the process of replacing traditional wiring harnesses has accelerated markedly. CCS (integrated bus bar) consists of FPC, copper bars, etc. As the core part of the battery system, it plays a key role in safety performance.
Strong market demand has brought broad market space. In the field of new energy vehicles, global sales of new energy vehicles increased 109% year on year in 2021, and sales of new energy vehicles in China increased 158% year on year. Strong downstream demand is driving rapid growth in power battery loading capacity. Major global power battery companies are clearly willing to expand production. Domestic major power battery companies such as Ningde Shidai, BYD, and China Innovation Aviation have planned a total production capacity of more than 3 TWh in 2025. In the energy storage sector, according to the conservative forecast of the Zhongguancun Energy Storage Industry Technology Alliance, the cumulative installed capacity of electrochemical energy storage in China will reach 57.4% in 2021-2025. Strong demand in the field of new energy vehicles and energy storage will bring huge market space for CCS and FPC modules.
Focus on the core technology of the main business and seize new development opportunities. The company has always insisted on expanding industrial chain applications around core technological advantages. In 2018, the subsidiary Dongguan Juming started production and greatly increased the supporting supply capacity of FPC materials, laying the foundation for the expansion of the company's backlight module business while also achieving supply to external customers. With the company's continuous accumulation of FPC and SMT capabilities, the company has now completed the verification of CCS module design technology and production technology according to customer needs. The production plan is being optimized at this stage, and small-batch production will be carried out in the next stage.
The industrial layout is clear, and the advantages of integration are obvious. The company plans to enter the connector field through mergers and acquisitions. In terms of product structure, Xinweixing's high-voltage connectors in the new energy sector can be applied to battery packs, distribution boxes, motor controllers, etc., to help the company effectively expand its business coverage. Furthermore, connectors are also an important part of CCS modules, and effective cost control will be achieved through in-house production of connectors. In the field of new energy vehicles, the company has developed miniLED backlight products, light touch switch products, etc., which can provide customers with one-stop diversified solutions in terms of horizontal product layout with connectors, CCS, FPC modules, etc., which are extremely expandable. In terms of vertical business integration, the company will also have R&D and manufacturing capabilities for parts such as FPCs and connectors and R&D and manufacturing of modular products such as backlight modules and CCS modules. The advantages of vertical integration are obvious, and the clear industrial layout will contribute new growth momentum to the company's future development.
[Investment advice]
The company has been deeply involved in the fields of light guide components and modules and precision key switches for many years. It has become a leader in the consumer electronics industry segment and continues to expand applications in new fields such as automotive miniLEDs. The company has a broad presence in the field of new energy. It plans to quickly enter the connector field through mergers and acquisitions, and plans to invest in expanding the CCS and FPC module business in the field of new energy vehicles and energy storage to establish a new growth pole. Based on its own products and technical advantages, the company actively grasped downstream market development opportunities. We raised the company's 2023-2024 revenue forecast. The company's revenue for 2022-2024 is estimated to be 940, 1,627, and 2,642 million yuan respectively. The company's net profit for 2022-2024 is estimated to be 1.60, 289, and 412 million yuan respectively. The corresponding EPS is 1.06, 1.91, 2.72 yuan/share, corresponding to the current PE of 33, 18 and 13 times, respectively, maintaining the “increase in holdings” rating.
[Risk Reminder]
Downstream demand fell far short of expectations
The promotion progress of the new project fell short of expectations
