Incident: The company released its 2023 semi-annual report. 23H1 achieved revenue of 289 million yuan, an increase of 3.58% over the previous year; realized net profit of 28 million yuan, a year-on-year decrease of 10.39%; realized net profit of 27 million yuan after deducting non-attributable net profit of 27 million yuan, a year-on-year decrease of 8.56%.
Q2 The month-on-month improvement is obvious, and the cost side is under pressure in the short term:
23Q2 achieved revenue of 160 million yuan (YoY +6.37%, QoQ +24.41%), net profit of 17 million yuan (YoY -13.60%, QoQ +46.39%), net profit of 0.16 million yuan (YOY -12.45%, QoQ +43.92%), gross profit margin of 41.69% (YOY+3.90pct, QoQ-0.29pct), net interest rate of 10.34% (YOY-2.54pct, qOQ+1.8). Expenses such as depreciation of 23H1 fixed assets, stock payments, R&D personnel remuneration, and R&D material investment increased year-on-year. In the first half of the year, management expenses reached 41,3274 million yuan (YoY +30.68%), and R&D expenses reached 356.8894 million yuan (YoY +55.65%).
Continue to increase R&D investment and enhance product capabilities in multiple dimensions:
The company attaches great importance to independent research and development, continuously enriches product lines and models, goes hand in hand with military products and civilian goods, and has a strong competitive advantage in market segments. 23Q2's R&D expenses reached 199213 million yuan (YoY +85.76%, QoQ +26.34%). 23H1's R&D personnel increased by 47 to 172 over the same period last year, and the proportion of R&D personnel increased from 12.96% to 15.67%; in the first half of the year, the company applied for 30 patents and obtained 32 authorized patents. Looking at 23H1 by downstream applications, 1) New energy: 1.1) DC contactor revenue was 98 million yuan (YoY -19.67%. We believe the decline was mainly affected by the removal of new energy vehicle terminals and cost reductions), the Touchpoint Group's revenue was 22 million yuan (YoY +33.76%), and the subsidiary Guoli Yuantong achieved net profit of -8.3762 million yuan. The company has developed products such as a new generation of automotive high-voltage DC contactors (Y series), high-voltage high-current contactors for energy storage (400-900kW serialization), and wireless integrated high-voltage control boxes.
1.2) AC contactor revenue was 51 million yuan (YoY +10.38%), switch tube revenue was 18 million yuan (YoY +5.60%), and the subsidiary Ruipu Electric achieved net profit of 2,520,300 yuan. The company has carried out research and development of AC contactor-related products and technologies such as dual decoupling board mounted AC contactors and plateau fast bypass switches to match new application scenarios.
2) Semiconductor equipment: The main product, vacuum capacitors, had revenue of 17 million yuan (YoY -9.32%).
The company has developed high-performance fine vacuum capacitors to improve product life and capacity accuracy and meet the needs of high-end applications in the semiconductor industry. The company took the lead in achieving a breakthrough in domestic technology in the field of semiconductor vacuum capacitors. The product performance is basically comparable to international leaders, has a certain cost advantage, and has a broad scope for localization.
3) Aerospace and military industry: The main product, vacuum relays, had revenue of 64 million yuan (YoY +51.19%). The new fast high voltage relay product passed the small-batch trial by users, and the product passed the review for mass production. The company is a domestic military vacuum relay supplier that entered the market earlier. The industry has a high entry threshold and strong customer stickiness.
4) Others: Vacuum active device revenue was 113 million yuan (YoY +164.14%). The company continues to develop high-power S-band magnetrons, high-power speed regulators, and high-power couplers to meet applications in accelerators, big science, etc.; at the same time, it continues to develop barium tungsten cathodes to enhance the autonomous controllability of key components of active devices.
IPO fund-raising projects have entered a harvest period, and convertible bonds help embrace the new energy market:
According to the company's interim report and prospectus, in the IPO fundraising project, 1) vacuum relay and vacuum capacitor production project: It has reached the intended state of use by the end of 2022. After delivery, it is expected to have an annual production capacity of 50,000 ceramic vacuum capacitors, 120,000 ceramic high voltage vacuum relays, and 10,000 vacuum active devices, corresponding to an output value of 160 million yuan and a net profit of 52.5 million yuan. 2) HVDC contactor production project: At the end of June 2023, it has reached the intended state of use. After delivery, it is expected to form a production capacity of 3 million ceramic HVDC contactors per year, corresponding to an output value of 330 million yuan and a net profit of 43.93 million yuan. 3) Electronic vacuum device R&D center project: It has reached the intended state of use at the end of June 2023. The project focuses on developing high-end equipment such as high-power speed control tubes, industrial ball tubes, and high-power magnetrons. In June 2023, the company issued convertible bonds to raise 480 million yuan to increase production capacity related to new energy. It is expected to reach the intended state of use by the end of 2025. After delivery, it is expected to have an annual production capacity of 6.48 million DC contactors (640 million yuan output value), and an annual production capacity of 1.65 million AC contactors (375 million yuan).
Investment suggestions: We expect the company's revenue for 2023-2025 to be 917 million yuan, 1,358 million yuan, and 1,993 million yuan respectively, and net profit to parent to be 96 million yuan, 211 million yuan, and 346 million yuan respectively. According to Wind's unanimous expectations, referring to the average PE value of comparable companies such as Hongfa Co., Ltd., Fuchuang Precision, and Aerospace Electric, etc., and considering the company's scarcity as a domestic electronic vacuum device platform enterprise, we are optimistic about the company's future broad growth space in the semiconductor, military, etc., giving the company 32 times PE in 2024. The corresponding target price is 70.54 yuan, maintaining the “buy-A” investment rating.
Risk warning: downstream demand falls short of expectations; production capacity release falls short of expectations; market expansion falls short of expectations; risk of declining product profit levels in the field of new energy vehicles; risk of fluctuations in raw material prices.