With thermal management materials as the core product line, mainly used in the field of consumer electronics
The company is a diversified functional materials provider with thermal management materials as the core. Its main business is R&D, production and sales of thermal management materials, magnetic materials, nano protective materials, etc. The company mainly sells products such as synthetic graphite heat dissipation films and synthetic graphite heat sinks, etc., which are mainly used in consumer electronics fields such as smart phones, tablets, and smart wearable devices. With rich product experience, excellent product quality and good customer service, the company has become a supplier to well-known customers in Xiaomi, Vivo, Samsung, Google, ABB, Flextronics and other industries.
Operating income is growing steadily, and gross margin is declining in the short term
In 2020-2022, the company achieved operating income of 2.95/4.49/423 million yuan, a year-on-year change of 8.25%/52.09%/-5.84%, a compound growth rate of 19.7%; net profit of 0.53/0.57/0.58 billion yuan, a year-on-year increase of 44.93%/8.30%/1.76%, and a compound growth rate of 5.0%. In 2020-2022, the company's comprehensive gross margin was 34.67%/27.61%/25.82%, respectively, showing a downward trend year by year. The main reason is the intense competition in the consumer electronics sector and the decline in the sales price of the company's products.
The company's main business can be divided into four sectors: thermal management materials, magnetic materials, nano protective materials, and others. In 2022, the company achieved revenue of 3.92/0.04/0.03/0.2 billion yuan respectively, accounting for 93.51%/0.61%/1.06%/4.81% of the main business. By product, the company's revenue mainly comes from two major products, synthetic graphite heat sinks and synthetic graphite heat dissipation films. In 2022, it achieved revenue of 255/91 billion yuan respectively, accounting for a total share of 82.34% of the main business.
Based on consumer electronics, automotive electronics and communication base stations are expected to drive industry expansion
Thermal management materials are functional materials that help products improve the heat dissipation effect. They are used to improve heat transfer efficiency and distribute heat evenly. Their downstream markets include consumer electronics, automotive electronics, communication equipment, etc. According to QYResearch data, the global thermal management materials market space in 2022 was US$11.58 billion, and is expected to reach US$13.980 billion in 2028, with a compound growth rate of 3.2%.
Thermal management materials have a wide range of applications. In the field of consumer electronics, as smartphones enter the 5G era and develop in the direction of ultra-thinness, high performance, and intelligence, the size of the smartphone cooling market continues to increase. According to Yole's forecast, the compound annual growth rate of the global mobile phone cooling market in 2019-2022 was 29.72%.
In the field of automotive electronics and communication base stations, the cooling requirements of new energy vehicles and the high power consumption of 5G base stations are expected to drive the expansion of the thermal management materials market.
The product layout is perfect, and it is planned to invest 352 million yuan in project construction
The company has a perfect product layout and has relatively complete thermal conductive material products such as synthetic graphite heat dissipation films, synthetic graphite heat sinks, heat dissipation plates, heat pipes, etc., which can provide systematic solutions for consumer electronics products. Furthermore, the company has long focused on technical research and process improvement, and has complete intellectual property rights in technologies such as high-temperature sintering, targeted molding, and surface modification.
The company plans to invest 270 million yuan to build a high-performance heat conduction and heat dissipation product project to expand market share, alleviate the problem of insufficient production capacity, and enhance the company's profitability. In addition, the company plans to invest 82 million yuan in capital to build a new materials research and development center project to enhance innovation capabilities and enhance the company's market competitiveness.
Profit forecasting
It is predicted that the company's revenue for 2023-2025 will be 545, 7.06, and 910 million yuan respectively, and EPS will be 1.44, 1.89, and 2.47 yuan respectively. The current stock price corresponding to PE is 53, 41, and 31 times, respectively. We are optimistic about the company's extensive product layout in the field of thermal management materials, covering it for the first time, and giving it an investment rating of “increased holdings”.
Risk warning
Downstream demand recovery falls short of expectations, new product promotion falls short of expectations, increased industry competition, risk of fluctuations in raw material prices, risk of capital project construction progress falling short of expectations, risk of falling product prices, etc.