Event

On August 18, 2023, the company released its mid-term report in 2023: the company's operating income was 980 million yuan, down 29.59% from the same period last year; the net profit was 223 million yuan, down 54.12% from the same period last year; and the net profit was 221 million yuan, down 54.03% from the same period last year.

Comments:

Under the influence of downstream demand, the performance is temporarily under pressure. In the medium and long term, the performance is expected to resume in the first half of 2023. The company achieved operating income of 980 million yuan, down 29.59% from the same period last year. The company achieved a net profit of 223 million yuan, down 54.12% from the same period last year, mainly due to the low prosperity of the downstream market of the electronic components industry where the company is located and the slow recovery of customer demand. The company's overall gross profit margin was 46.47%, down 8.48 percentage points from the same period last year; the net profit margin was 22.54%, down 12.36 percentage points from the same period last year.

It is mainly due to the decline in the proportion of self-produced business with higher gross profit margin in the income structure. Despite the decline in performance, the company still maintained a high intensity of R & D expenditure, and strengthened the introduction of talent to this end, the number of employees continued to net growth, while maintaining the basic stability of employee salary level, the overall labor cost increased steadily. In the medium to long term, with the gradual recovery of downstream customer demand, the company's performance is expected to recover.

The demand for MLCC downstream is weak, and new businesses such as microwave modules achieve rapid growth of self-produced business income of 566 million yuan, down 31.31% from the same period last year, and gross profit margin of 71.99%, down 10.53% from the same period last year. This is mainly due to the weak customer demand for the company's core products, ceramic dielectric capacitors, resulting in a decline in sales of core products. Among them, the revenue of ceramic capacitors was 502 million yuan, down 36.89% from the same period last year, accounting for 88.67% of self-produced business income. The revenue of other electronic components such as microwave modules, microprocessors and microcontrollers launched by the company increased significantly, and sales accounted for 9.13% of self-produced business income. The revenue of the agency business was 412 million yuan, down 26.88% from the same period last year, mainly because some core customers were greatly affected by the external market, and their expectations for future demand continued to decline, reducing the procurement of electronic components. However, the current demand of customers in areas such as new energy vehicles and high-voltage frequency converters expanded by the company is growing rapidly, but it is difficult to make up for the reduction in demand of some core customers in the short term. Led to a decline in agency business revenue.

Continue to increase investment in R & D and enrich product categories

During the reporting period, the company's Innovation Research Institute was established, Hongyuan Electronic Innovation Center and Enterprise headquarters project started construction, the company continued to pay attention to R & D investment, R & D expenditure of 47.0998 million yuan, accounting for 8.31% of self-produced business income, an increase of 2.27% over the same period last year. In the field of high reliability, the company focuses on ceramic capacitors and ceramic materials, filters, microwave modules, microcontrollers and microprocessors, ceramic circuit boards, ceramic shells and other products, continuous in-depth research and development, and constantly enrich the product category. In the civil field, high-power RF microwave ceramic capacitors and packaging shell products have been partially developed and finalized, and small batch supply has been realized. At the same time, the car gauge-level multi-layer ceramic capacitor representative specification has completed a series of research and development, product certification and customer certification, and achieved small batch supply.

During the period, the expense rate increased, and the operating cash flow decreased significantly.

During the reporting period, the company's total expenses during the period were 150 million yuan, an increase of 1.32% over the same period last year, and the proportion of expenses in revenue was 15.29%. Among them, sales expenses were 42 million yuan, an increase of 8.35% over the same period last year, mainly due to the company's increased business-related expenses in response to the external environment of weakening market demand. The management fee was 58 million yuan, an increase of 6.75% over the same period last year, mainly due to the increase in professional service fees brought about by the company's expansion of new business and the increase in depreciation and amortization of long-term assets; financial expenses were 2.3534 million yuan, down from the same period last year

A decrease of 49.13% is mainly due to the increase in cash management income of the company in the current period, and the reduction of acceptance-related expenses due to the decrease in the number of bank acceptance drafts issued in the current period; R & D expenses are 47 million yuan, down 5.43% from the same period last year. The operating cash flow was 20 million, down 70.69% from the same period last year, mainly due to the increase in the number of commercial bills paid by the company in the current period compared with the same period last year.

Investment advice and profit forecast

As one of the most widely used and fastest growing electronic components, multilayer ceramic capacitors are widely used in the fields of high reliability and civil use. Due to the slow recovery of downstream customer demand and considering the release rhythm of downstream equipment, we downgrade its profit forecast and rating. It is estimated that from 2023 to 2025, the company's net profit will be 682 million yuan, 781 million yuan and 958 million yuan. EPS is 2.93,3.36,4.12RMB respectively, corresponding to PE 21.37x, 18.65x, 15.21x, given "overweight" rating.

Risk hint

Downstream demand is less than expected risk, product gross profit margin fluctuation risk.