Ai Hua Group, founded in 1985, is the leader of domestic aluminum electrolytic capacitors, with a complete industrial chain of "corroded foil + formed foil + electrolyte + special equipment + aluminum electrolytic capacitor". It has the first market share in lighting and fast charging in the world (according to the company announcement). Currently, it is actively deploying high-performance aluminum electrolytic capacitors, MLPC, chemical foil field. In 2019, the company made major breakthroughs in downstream areas such as 5G base stations, automotive electronics, power grid smart meters and data centers, while increasing direct sales with major customers, reducing intermediate docking processes and accelerating the introduction of key customers. Revenue grew by 2.01% in the first half of 2020, and net profit increased by 31.93%. This is mainly due to the further increase in the company's production capacity, the increase in the automation rate of new equipment, the further increase in the self-sufficiency rate of aluminum foil, and the reduction of operating costs. as a result of the increase in gross profit margin, the company's revenue expansion is expected in the second half of 2020 with the release of new production capacity for convertible bond investment projects.
The overall growth of mature industries has stabilized, and new applications have helped expand marginal market space: according to the China Electronic components Industry Association, the global output value of electrolytic aluminum capacitors was about US $7.2 billion in 2019 and maintained an annual growth rate of about 4 per cent. The development trend of miniaturization and lightweight of electronic equipment puts forward higher requirements for the performance of aluminum electrolytic capacitors, the main technical development trends are high temperature resistance, long life, high reliability, low ESR Cayman Limited, high ripple current, chip, miniaturization, environmental protection and so on. Take fast charging as an example, the mature high-end capacitor technology has been verified by downstream applications. Under the background of increasing per capita mobile phone usage time, increasing power consumption and reducing battery capacity, fast charging has gradually become the standard and third-party charging head of brand mobile phones. According to BCC Research,2017-2022, the global fast charging market will grow from US $1.727 billion to US $2.743 billion, with a 5-year CAGR of 9.69%. As one of the important components of fast charging head, the amount of aluminum capacitor per unit will also increase with the increase of fast charging power. As a leader in the fast charging industry, Aihua Group is expected to continue to increase its share in the fast charging market with cost-effective products.
The scale effect of mainland manufacturers is beginning to show, and the transfer route of the global industrial chain is clear: (1) in recent years, Japanese and South Korean manufacturers have successively withdrawn from low-end production capacity to automotive electronics and high-end manufacturing, relying on the advantage of relatively low labor and management costs. This part of low-end capacity gradually moved to Chinese mainland. (2) mainland manufacturers keep up with the demand side, enhance their technical strength, rise abruptly based on accumulated strength, and gradually improve their competitiveness in high-end application scenarios; (3) in terms of upstream raw materials, mainland manufacturers have achieved partial self-control, gradually forming the synergy effect of the whole industrial chain.
In line with the steady expansion of downstream demand and production capacity, the profitability of the layout complete industrial chain is gradually improved: in terms of production capacity, Ai Hua Group is one of the few enterprises in the world with a similar complete industrial chain; the company's semi-annual report 2020 revealed that its new equipment production has improved the company's automation rate, aluminum foil self-sufficiency rate has further increased (has reached 80%), reduced the company's operating costs, increased gross profit margin.
In 2016, the company issued convertible bonds to actively expand production, raising RMB 691 million yuan for lead aluminum electrolytic capacitor upgrading and production expansion project, horn aluminum electrolytic capacitor expansion project, laminated chip solid aluminum electrolytic capacitor production project, and Xinjiang medium and high voltage foil production line expansion project. By June 30, 2020, it had invested 426 million yuan and achieved benefits of 77.7185 million yuan in the first half of the year. In the market, the company makes great efforts to open up consumer and industrial markets, actively expand production and promote the research and development of high-performance products, and is expected to undertake capacity shift. the sales team has not only consolidated its existing market position, but also accelerated the exploration of emerging markets.
Investment suggestion: we estimate that the company's income from 2020 to 2022 will be 2.629 billion yuan (+ 16.6%), 3.198 billion yuan (+ 21.7%) and 3.878 billion yuan (+ 21.3%) respectively, and the net profit will be 403 million yuan (+ 19.3%), 500 million yuan (+ 24.2%) and 607 million yuan (+ 21.3%) respectively, and the EPS will be 1.03,1.28,1.56 yuan respectively. The corresponding PE is 28 times, 22 times and 19 times respectively, covering for the first time and given a "buy-A" investment rating.
Risk tips: industry competition risk; downstream demand change risk; raw material price fluctuation risk.