The cost advantage of the integrated layout is remarkable, and R&D investment continues to increase. The company has been deeply involved in the film capacitor industry for more than 50 years. During this period, it continued to promote independent product R&D and innovation and establish integrated core competitiveness in research, production and sales. The industry had a stable leading position. In 2023, the company had a global market share of 8%, second only to Panasonic and Jimei, making it the third largest film capacitor brand in the world and the number one domestic thin-film capacitor brand. In 2005, the company completed a technical transformation project for an aluminum metallized film production line for film capacitors, realized the integrated layout of aluminum metallized film and evaporation processes, and broadened the moat of cost advantages. The gross margin of 23Q1-Q3 was 38.69%, and its profitability was significantly superior to that of major domestic friends Tongfeng Electronics and Jianghai Co., Ltd. 2023Q1-Q3, the company spent 110 million yuan on R&D, up 15.7% year on year; R&D expenses rate was 3.82%, +0.45pct year on year. The increase in R&D expenses helps accelerate the iteration of core technology and achieve an increase in the capacity density of film capacitor products, thereby increasing product profits.
The NEV business is growing well, and the photovoltaic business may return to a normal growth curve in 24 years. Currently, the company's largest business segments are new energy vehicles and photovoltaics, which account for about 40% and 30% of the company's total revenue, respectively. The NEV business is currently growing well globally. The sales volume and penetration rate of new vehicles are increasing steadily. It is predicted that global NEV sales may reach 25 million units in '25, corresponding to a CAGR of 31%. It is expected that the automotive film capacitor industry will maintain a growth rate of 30%-40% in 24/25. In terms of the photovoltaic business, due to the impact of the international environment, part of the PV installed demand was released early in '22, leading to a decline in demand growth in '23. We believe that the growth rate of new installed capacity will return to a normal curve after 24 years, and the photovoltaic thin-film capacitor industry may maintain a growth rate of 25%-30% in 24/25.
Actively plan to expand production capacity related to new energy vehicles to help improve the company's core competitiveness. In recent years, the company's NEV business has developed rapidly, and the capacity utilization rate has remained at a high level for a long time. After 2022, the company actively laid out production capacity expansion projects for NEVs, including the “New Energy Film Capacitor Transformation Phase IV Project” and the “Dongfu Phase II Production Expansion Plan”, with a total investment of 220 million yuan and 40 million yuan respectively. At present, the second phase of Dongfu's production line has been completed and is expected to be put into operation by the end of the year. The fourth phase of the transformation of film capacitors for new energy has invested 144 million yuan, accounting for 65.32% of the estimated investment. It is planned to be put into operation next year. The new production capacity investment will help the company strengthen its scale effect, form a greater production cost advantage, and promote an increase in production and sales.
Investment advice: We expect the company to achieve revenue of 40.889/50.766/6.371 billion yuan in 2023-2025, net profit to mother of 1,052/13.29/1,619 billion yuan, EPS of 4.68/5.91/7.20 yuan respectively, and PE of 22/18/15 times. The first coverage will be given a “recommended rating”.
Risk warning: Raw material prices fluctuate, market competition intensifies, and downstream demand falls short of expectations.