Key points of investment
Domestic aluminum electrolytic capacitors lead, annual revenue continues to grow steadily: The company is a leader in domestic aluminum electrolytic capacitors and has a complete industrial chain of “corroded foil+chemical foil+electrolyte+special equipment+aluminum electrolytic capacitor”. The company's revenue has been growing steadily since 2018, with a CAGR of around 12% in 18-22.
Profitability declined slightly in 2022 due to market conditions, and the impact continued until the first half of 2023. In the first half of 2023, with the company's implementation of more active management policies and product structure expansion, the second quarter's performance showed an upward inflection point. The company achieved main business revenue of 855 million yuan, an increase of 23.3% over the previous month; net profit for the return was 105 million yuan, an increase of 16.6% over the previous month. In 2023, H1, the company achieved total operating income of 1,561 million yuan, net profit of 195 million yuan, and a net sales interest rate of 12.41%.
Japanese manufacturers of aluminum electrolytic capacitors are leaning towards high-end products, and domestic alternatives are opening up: on the demand side, due to strong growth in demand in fields such as new energy, 5G communications, and computer equipment, the global aluminum electrolytic capacitor market will be about 62 billion yuan in 2022, over 70 billion yuan in 2025, and a CAGR of about 4% in 22-25. On the supply side, due to intense competition for low- and middle-end aluminum electrolytic capacitors, Japanese manufacturers are shifting to the high-end market due to cost disadvantages, providing sufficient domestic replacement space for domestic manufacturers. Domestic aluminum electrolytic capacitors Shuangxiong Aihua Group and Jianghai Co., Ltd. increased their market share of aluminum electrolytic capacitors from 7% in 2013 to 13% in 2020
The company continues to optimize the product structure and focus on R&D to conquer the high-end market: on the one hand, the company continues to consolidate its leading position in the fields of lighting and fast charging for mobile phones; on the other hand, it is actively expanding the market for high-end product applications in the consumer electronics and industrial fields, and is steadily improving the company's sales performance. In terms of vertical extension of the industrial chain, the company has a complete industrial chain, with outstanding advantages in integration and cost reduction. In terms of horizontal product expansion, the company attaches importance to R&D and has gradually broken through high-end products such as solid-state capacitors and MLPCs.
According to market demand, the company enriches its product structure, expands its industrial power supply market share, and gradually shifts its product focus from the traditional advantageous LED lighting field to consumer power supplies, industrial power supplies, etc. to a more prosperous race track. In 2017-2022, the industrial power sector's share of revenue increased from 26.22% to 45.62%, and revenue increased from 450 million yuan to 1,463 billion yuan. In the first half of 2023, demand for new energy (photovoltaics, energy storage, wind power), new energy vehicles, and industrial markets further expanded. The company continued to innovate technology, and the share of industrial control capacitors increased 11.93% year-on-year.
Profit forecast and investment rating: The company is a leader in domestic aluminum electrolytic capacitors, and product structure optimization opens the ceiling for growth. Based on this, we predict that the company's operating income for 2023-2025 will be 36.8/41.7/4.94 billion yuan, net profit to the parent will be 4.6/5.32/635 million yuan, and the current market value corresponding to PE is 18.0/15.6/13.1 times. For the first time, it covers the “buy” rating.
Risk warning: Downstream application market growth falls short of expectations; risk of industry competition; risk of production cost fluctuations.