Short-term performance is under pressure, and high investment guarantees long-term momentum.
1) 23Q1 to Q3: Revenue of 486 million yuan, +1% year-on-year, net profit of 52 million yuan, -11% year-on-year, non-46 million yuan, -17% year-on-year. Gross profit margin +39%, y-o-y +0.4pcts, net profit margin 11%, y-o-2pcts. R&D expenses for the first three quarters were 52 million yuan, +18% over the same period, and the R&D expense rate was 11%, up 3pcts from last year; management expenses were 64 million yuan, +12% over the same period last year, and the management expense rate was 13%, up 1pct from last year.
2) 23Q3: Revenue of 197 million yuan, -2% yoy, +23% month-on-month, net profit of $24 million, -11% yoy, +41% month-on-month, deduction of $0.18 million, -28% yoy, +13 month-on-month. Gross profit margin +36%, yoy-4pcts, q-6pcts, net profit margin +12%, yoy-1pcts, q+2pcts.
In the first three quarters, the company's revenue was basically the same year over year, and profit declined year over year. Mainly to guarantee future growth, the company increased investment in R&D and other expenses, compounded by the impact of interest expenses on convertible bonds. The company's short-term performance was under pressure, and there was optimism about the subsequent explosion of the company's semiconductor and military business.
New energy: Automobiles are driving passenger cars to open up more than ten times more space, and the wind and solar storage industry is booming.
1) Automobiles: Ceramic HVDC contactors and contact group products. According to our estimates, the global market was 5.2 billion yuan in 2020. The layout has been around 10 years, covering high-quality customers such as Tesla, Ningde Era, and Huichuan. The pace of industrialization and technical strength are leading in mainland China. In 2020, the commercial vehicle market in mainland China accounted for about 50%, and passenger cars were only about 10%. In 2021, the transition to passenger cars opened up more than ten times more space.
2) Wind and wind storage: DC contactors and vacuum AC contactors are used in photovoltaic inverters, wind power converters, etc. The customers are of high quality, active efforts are made after launch, and there is plenty of room for improvement.
Semiconductors: Core equipment components, the only local manufacturer, and domestic substitution accelerated.
Ceramic vacuum capacitors and vacuum relays. Ceramic vacuum capacitors are RF power matching devices for etching and film deposition machines. The company's product performance can be directly benchmarked against Swiss Comet and Japan's Meidensha to accelerate domestic replacement. They have now been introduced to Huachuang, Zhongwei, etc., and supply is in short supply. In 2021, the combined revenue of Swiss Comet and Japan's Meidensha vacuum capacitors was about 5.5 billion yuan, and the company's product revenue in 2022 was 42 million yuan, so there is huge room for replacement.
Military industry: Demand for domestic substitution has exploded, and companies are expected to experience high growth.
It started with military products and has complete qualifications. It supplies ceramic high-voltage vacuum relays, DC contactors and other devices. The products are used in aerospace, vehicles, etc. Benefiting from demand catalysts in the defense and military industry, the company is expected to achieve long-term rapid growth in the context of localization.
Investment advice: Leading electronic vacuum device manufacturers in mainland China, with strong technical scalability, downstream covering popular tracks such as new energy, semiconductor components, and military industry. They are optimistic about the increase in the share of the new energy business, and the explosion of military and semiconductor relays. Previously, the net profit for 23/24/25 was estimated to be 1.8/27/4.0 million yuan. Considering that the downstream boom for new energy vehicles fell short of expectations, etc., the adjusted net profit for 23/24/25 was 0.9/16/280 million yuan, corresponding to PE 53/30/17 times, maintaining the “buy” rating.
Risk warning events: downstream demand falls short of expectations, new product progress falls short of expectations, etc.