Analysis and judgment:
The middle tune may be about to land, and a new round of large-scale orders will be released soon.
Since September, AVIC Shenfei, Beizhong Group, Optoelectronics Group and other companies have all organized relevant meetings such as seminars on mid-term evaluation and adjustment of the 14th five-year Plan. We believe that a series of signals may indicate that the middle transfer is coming. The military industrial chain is about to usher in a new round of large-scale order release period. At the same time, Shen Fei's article disclosed that "the conference system summarizes the development achievements of Shenfei Company in the past three years, comprehensively analyzes the internal and external situation, discusses and exchanges the goals and paths in 2024 and 2025, and plans the development ideas to 2027 as a whole." We believe that the centenary goal of the founding of the army in 2027 is ahead, and if this adjustment can cover demand until 2027, it will provide a solid guarantee for the medium-term growth of upstream and downstream enterprises, or effectively boost market confidence.
The upstream MLCC manufacturer has the greatest flexibility, and Hongyuan is the wind vane of industry prosperity.
In terms of quantity, the MLCC is a universal component, and the downstream covers all areas of the military industry, which is closely related to the total amount and is less affected by internal structural adjustment. We expect MLCC manufacturers to fully benefit from the next order cycle. At the same time, reviewing the previous round of military industry market, we combed the year-on-year growth rate of revenue in each quarter for 20 years, and compared with the Defense military Industry (CITIC) index, MLCC manufacturers, as the top of the industrial chain, showed growth earlier, and we expect it to take the lead in the next round of growth. We believe that the company's orders are expected to continue to improve and full-year performance is expected to continue to rise. We emphasize that Hongyuan Electronics is a typical target that can best reflect the prosperity of the military industry. Judging from several rounds of small rebound since June this year, the company has led the industry many times, and market attention continues to rise.
In terms of supply and demand, with the digestion of orders over the past year, we judge that the current downstream inventory has been cleared. At the same time, as customers continue to expand production, downstream production capacity may be released to a high level, short-term bottleneck is expected to achieve a breakthrough. At the same time, the production pace of MLCC is fast, and the shipment volume is very flexible. According to the record table of the company's customs activities, the average delivery period of the company's products is 2 months. in order to respond quickly, the company will make part of the inventory reserve, which can be delivered in about a week at the earliest. We believe that once downstream demand starts, the company's performance will rebound quickly.
In terms of price, MLCC has the characteristics of small quantities and multi-batches, the purpose of price reduction is more in "quantity for price", and the price reduction model will be "ladder-like". We believe that with the mass production of new models and the substantial recovery of orders, the improvement of the quality level of the company's new products and the appearance of economies of scale will lead to a certain degree of improvement in price or profitability, forming a certain hedge, and there is no need for the market to be overly pessimistic.
Continue to expand new categories and new areas, and open the ceiling of military products
The company deepens the key areas of MLCC, vertically expands the industrial chain, upstream layout materials (MLCC porcelain, LTCC porcelain and raw film tape, electrode paste), downstream development of filters and integrated circuit devices, and strives to achieve technical differentiation. In recent years, the company has built bases in Chengdu and Hefei. according to the company announcement and customs activities, Chengdu mainly focuses on the development of microwave modules, microcontrollers and microprocessors, and has entered the qualified supplier of many key units. the technical level is in the forefront of the industry. Hong Lixin and Hong Qixing, two companies in 23H1 Chengdu, have a combined revenue of 50.1195 million yuan, a sharp increase of 185% over the same period last year. Hong Lixin has made a profit. According to the company announcement and official WeChat, Hefei base production line (Liuanhong Anxin HTCC ceramic packaging components project) has been completed, is now in the trial production stage, has initially formed from the basic materials, ceramic circuit boards, ceramic shell to integrated packaging to provide micro-system packaging solution capabilities, and gradually to highly reliable customers and photoelectric detection and high-speed communications, radio frequency and microwave, integrated circuits and other applications.
Multi-point blooming in the civilian field to create the second curve of growth
In terms of automotive electronics, according to the company announcement, the representative specification of multi-layer ceramic capacitors has completed a series of research and development, product certification and some customer certification, and achieved small batch supply.
In terms of communications, according to the company announcement, the company has completed the serial development of ultra-low ESR Cayman Limited (equivalent series resistance) RF microwave ceramic capacitors and high-power RF microwave ceramic capacitors, and continued the serialization development and expansion of chip capacitors. has achieved mass production and supply, and gradually promoted in communications and other fields. In addition, according to the disclosure of the company in the investor question and answer platform, the company's SLCC and ceramic shell products provide samples to optical module manufacturers and supply small quantities. Moreover, some of the company's products are currently in cooperation with Huawei.
In terms of commercial aerospace, according to the company announcement, the company, in conjunction with Anhui Provincial Innovation Museum, has established a Micro / Nano system Integration Technology Innovation Research Institute, centering on the needs of commercial aerospace and other emerging industries, committed to the development of new products and technologies related to major strategic directions such as radio frequency microsystems and optoelectronic microsystems. According to the disclosure of the company's customs activities, the company has participated in the matching of products in the commercial aerospace field and has been supplied in small quantities at present.
Investment suggestion
We believe that the current market focus on the medium-term adjustment after the landing of incremental orders, the current node companies are out of profit, performance, valuation are at the bottom, with the start of a new round of order cycle, or will realize Davis double-click. Taking into account the uncertainty of the downstream volume rhythm, we adjust the company's profit forecast for 2023-2024 and add the 2025 forecast. It is estimated that the company's operating income for 2023-2025 will be 22.10 pesos 29.64 / 3.645 billion yuan (previously 2023 and 2024 is 32.70 yuan and 4.081 billion yuan). The net profit of the homing mother is 5.658.39 / 1.082 billion yuan (previously 11.71 yuan and 1.513 billion yuan in 2023 and 2024). 2.43 EPS 3.62 EPS 4.66 yuan (previously 5.04,6.51 yuan in 2023 and 2024). Corresponding to the closing price of 65.90 yuan per share on September 25, 2023, PE is twice as much as 27-18-14, maintaining the "buy" rating.
Risk hint
1) the company's self-produced products are mainly used in the military industry, with strong customer procurement planning, and there is a risk that customer orders are lower than expected; 2) the company's agency business is greatly affected by international MLCC prices, and there is a risk that product prices and profit margins will decline; 3) downstream customers cover a wide range of customers, and there are many restrictions on the production expansion progress of some customers, and there is a risk that the release rhythm of downstream demand is not as fast as expected.