Key points of investment:
The company is an electronic component manufacturer that has been deeply involved in electronic ceramics for more than 50 years, and has completed the integrated layout of the industrial chain in terms of materials and devices. MLCC production capacity continues to rise, high-capacity categories continue to break through, and automotive MLCCs have also passed certification, which is expected to continue to drive performance growth.
Fifty years of deep cultivation in electronic ceramics, integrated layout of materials and devices
Since its establishment in 1970, the company has focused on the integrated business of R&D, production and sales of electronic ceramic devices and materials. With electronic ceramics as the core, the company has continuously expanded its business boundaries, providing various device products such as MLCC, ceramic substrates, optical communication plugs and sockets, ceramic packaging bases, and ceramic splitters.
Moreover, a number of businesses have been cultivated and formed on a large scale. In 2022, the revenue of the electronics industry, the communications industry, and the semiconductor industry reached 1,461 million yuan, 14.79 billion yuan, and 980 billion yuan respectively. At the same time, many businesses are still in the cultivation stage.
MLCC production capacity is being increased year by year. Companies that continue to grow downstream, such as new energy vehicles, have launched two MLCC production expansion projects separately in 2020-2021. The total expansion capacity is about 540 billion units per year, and production is expected to reach 2025. MLCC, known as rice for the electronics industry, has the largest share among the three basic components. It is widely used in fields such as smart phones, new energy vehicles, and 5G base stations, and is expected to have a double click effect of simultaneously increasing the number of terminals and standalone usage. At the same time, the company continues to strengthen R&D and production of high-value products, and the average unit price of products is expected to gradually increase.
Continued R&D has broken through high-capacity MLCCs and accelerated the high-end localization process. In 2022, the company spent 452 million yuan on R&D, an increase of 8.04% over the previous year, and the R&D expenditure rate reached 8.74%.
The company's R&D personnel reached 1,817 by the end of 2022, an increase of 5.03% over the previous year, accounting for 15.43% of the total workforce. The company's R&D expense ratio is among the highest among comparable A-share companies. After a long period of investment, the company has broken through high-capacity MLCC technology. In-vehicle high-capacity MLCCs have now passed the vehicle regulation system certification, and some conventional capacity specifications have begun to be introduced into the automotive supply chain.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2023-2025 to be 59.93/74.66/9.032 billion yuan, with a year-on-year growth rate of 16.38%/24.58%/20.97%, respectively; net profit of 15.12/20.37/2,502 billion yuan, a year-on-year growth rate of 0.49%/34.68%/22.84%, respectively; and a 3-year CAGR of 18.47% EPS, 0.79/1.06/1.31 yuan, respectively. The corresponding PE is 39/29/24 times.
The absolute valuation method measured the company's value per share at 39.24 yuan. Comparable, the company's 24-year average PE was 28 times. Given the company's leading MLCC position in the country, it was given 35 times PE in 2024, corresponding to the target price of 37.19 yuan, covering the first time, and giving it a “buy” rating.
Risk warning: risks such as macroeconomic fluctuations, increased market competition, falling core product prices, and cost fluctuations.