Domestic fuse leaders have maintained rapid growth in performance. Since its establishment in 2007, the company has focused on R&D, production and sales of high-end power fuses and related accessories for 16 years. Currently, new energy vehicles and wind storage together account for more than 80% of the company's revenue. Downstream customers include leading companies in the industry such as Tesla, BYD, Ningde Era, Sunshine Power, and Huawei. In the first three quarters of 2023, the company achieved operating income of 758 million yuan, +56.6% year on year; realized net profit of 85 million yuan, -9.8% year on year. The decline in profit was mainly due to the company's total equity incentives and tax expenses of 68.13 million yuan in the first three quarters. If added back, net profit to mother was 153 million yuan, +62% year over year.
The trend of 800V fast charging is clear, and the value of bicycle fuses is expected to double. New models of the 800V platform have been released intensively, and high-voltage fast charging is expected to usher in the first year of volume. We expect the penetration rate of domestic 800V models to be 8%/15%/20% in 2024-2026, respectively. Under the trend of high voltage fast charging, higher requirements are placed on the pressure resistance, safety, and breaking capacity of fuses. At the same time, it has spawned demand for incentives to load fuses, and the value of new energy passenger cars and bicycles is expected to double. In the long run, increasing demand for automotive intelligence is expected to restructure the low-voltage switch device pattern, and eFUSE is expected to become a low-voltage protection trend in the future.
Wind and solar storage is booming, and the fuse market space is vast. In recent years, China's photovoltaic and wind power industries have steadily ranked first in the world. The installed scale of electrochemical energy storage has maintained rapid growth, and the value of a single GW fuse is high, which is expected to fully benefit from market expansion. We expect the global wind and solar storage fuse market to reach 6 billion yuan in 2026, with a compound growth rate of 26.7% from 23 to 26.
Years of intensive cultivation have established a leading edge, and the overseas layout is expected to inject new momentum. The company's new energy vehicle business layout was early, and it entered many well-known car companies with technology accumulation and rich product matrices. As demand for high-voltage fast charging and intelligent vehicles increased, the company accelerated the localization layout of new products such as incentive fuses and eFuse, and the business is expected to grow rapidly with the volume of high-value products. On the overseas side, the company has accelerated its global channel expansion and has successively received multiple fixed orders from European customers in 23 years. It is expected that overseas customers will contribute significant performance increases in the future, and the company's share of the global fuse market is expected to continue to increase.
Investment advice: Consider the company's stable domestic leading position in the field of new energy vehicles and wind and solar storage fuses, and industry expansion to drive the company's continued growth. We expect the company's net profit to be 1.55/ 2.57/410 million yuan in 23-25, respectively, +1.1%/+65.5%/+59.4% year-on-year, and corresponding EPS of 2.35/3.88/6.19 yuan. It was given a target price-earnings ratio of 30X in 24 years, and the target price was 116.4 yuan. For the first time, coverage gave it an “increase in weight” rating.
Risk warning: Market competition intensifies; NEV sales fall short of expectations; raw material prices fluctuate greatly; technology upgrades and iterations are not timely.