Event: The company released its three-quarter report for 2013

The 23Q3 performance was in line with expectations, and the expansion of product structure opened up room for growth. In 23Q1-3, the company achieved revenue of 2.58 billion yuan, YoY -2%, net profit of 320 million yuan, and YoY -5%; in 23Q3, the company achieved revenue of 1.01 billion yuan, YoY +22%, QoQ +19%, and net profit of 130 million yuan, close to the historical single-quarter high, YoY +25%, QoQ +22%. In '23, as the company implemented a more active management policy and expanded product structure, the company's performance showed a quarterly upward inflection point.

Japanese manufacturers of aluminum electrolytic capacitors are leaning towards high-end products, and domestic replacement space is opening up: on the demand side, due to strong demand growth in the fields of new energy, 5G communications, computer equipment, etc., the global aluminum electrolytic capacitor market in 2022 will reach 62 billion yuan, reach more than 70 billion yuan in 2025, and a CAGR of about 4% in 22-25. On the supply side, due to intense competition for mid-range and low-end aluminum electrolytic capacitors, Japanese manufacturers have switched to the high-end market due to cost disadvantages, providing sufficient domestic replacement space for domestic manufacturers. The market share of domestic aluminum electrolytic capacitors Shuangxiong Aihua Group and Jianghai Co., Ltd. in aluminum electrolytic capacitors increased from 7% in 2013 to 13% in 2020.

The product structure continues to be optimized, and the consumer electronics business has reached an inflection point. The company actively expands downstream application fields and continues to make breakthroughs in industrial control, new energy and other fields. In 2018-2022, the share of industrial capacitors in revenue increased from 28.77% to 42.47%, and operating income increased from 622 million yuan to 1,463 million yuan. In 2022, the share of industrial revenue surpassed consumer electronics for the first time. In the first half of 2023, with the further expansion of demand in the new energy and industrial markets, the revenue share of industrial control capacitors increased by 11.93pct year-on-year, and the revenue structure continued to be optimized. Affected by the recovery in consumer electronics in the third quarter of 2023, the company's revenue increased month-on-month, and the consumer electronics business has reached an inflection point.

Profit forecast and investment rating: The company is a leader in domestic aluminum electrolytic capacitors, and product structure optimization opens up growth ceilings. Based on this, we maintain our original profit forecast. The estimated operating income for 2023-2025 is 36.8/41.7/4.94 billion yuan, net profit of 4.6/5.32/635 billion yuan, and the current market value corresponding to PE is 19/17/14 times, maintaining the “buy” rating.

Risk warning: Downstream application market growth falls short of expectations; risk of industry competition; risk of production cost fluctuations.