The company focuses on the power fuse market and benefits from the rapid development of new energy electric vehicles. The company was founded in 2007. It has been deeply involved in the high-end market of power fuses for many years and continues to develop new products in new markets. It has now become a domestic leader in the industry, mainly used in downstream fields such as new energy vehicles, new energy scenery, energy storage, communications, rail transit, etc. The company's main market segment is NEV, which accounts for about 50% of total revenue in recent years, and ranks first in the domestic NEV fuse field. Benefiting from the rapid development of new energy electric vehicles in recent years, the company's business achieved rapid expansion, and downstream orders continued to grow rapidly year-on-year in 2017-2022. In 2022, the company achieved operating income of 755 million yuan, an increase of 96.04% over the previous year; net profit to mother was 154 million yuan, an increase of 91.11% over the previous year.
Global landscape: American, Japanese, and European brands started early, and domestic manufacturers such as China Fusion continued to catch up. The global fuse industry has formed an oligopolistic competitive market dominated by foreign brands that started early and are more concentrated. The first tier of the industry is all foreign-funded brands.
Among them, Littelfuse and Bussmann together occupied 49.97% of the global market share in 2022, and the monopoly situation of giants in the industry is obvious. Domestic manufacturers, represented by companies, are using technological innovation and other advantages to speed up the pace of development and gradually narrow the gap between international giants. In 2022, the company's fuse business revenue was 755 million yuan, accounting for about 5.85% of the global fuse market, ranking first in the country.
The trend of 800V high voltage is obvious, and the value of vehicle fuses is expected to increase. The trend of high pressure on new energy vehicle platforms places higher demands on fuses, and the value of vehicle fuses is expected to increase by 20%. Active protection has become a trend under high performance requirements, and the penetration rate of incentive fuses is expected to increase. Higher sales unit prices for incentive fuses will bring greater contributions to the company's fuse ASP. Assuming that bicycles use an additional excitation fuse, the value of the vehicle's fuse is expected to increase from 115 yuan/vehicle to about 215 yuan/vehicle.
The eFuse electronic fuse brought a new growth point to the company's low voltage performance. Compared to traditional fuses, eFUSE has the advantages of being programmable, self-inspecting, self-recovering, small in size, multi-function integration, and faster response. Under the trend of intelligence, the low-voltage circuit of electric vehicles is gradually being upgraded from 12V to 48V, and the upper power limit is increased. In line with autonomous driving OTA, eFUSE electronic fuses are expected to be replaced. The company is committed to improving the level of eFUSE product development and market competitiveness, and is expected to use eFUSE to increase its global market share.
Covered for the first time, a “gain” rating was given. We expect the company's operating revenue for 23-25 to be 10.8/14.9/1.99 billion yuan, with year-on-year growth rates of +43%/+38%/+33%; net profit to mother of 2.2/3.1/420 million yuan, with year-on-year growth rates of +40%/+44%/+35% respectively; EPS is 3.25/4.67/6.31 yuan, respectively, and the P/E corresponding to the current price is 30/21/15 times (closing price on March 25, 2024). Considering the company's domestic market share, which continues to rise, it was covered for the first time. Give it an “gain” rating.
Risk warning: Risk of fluctuations in NEV-related industries; risk of customer demand in wind power, photovoltaic and other industries falling short of expectations; risk of increased industry competition; risk of increasing penetration rate of high-voltage NEVs falling short of expectations; risk of rising raw material prices; risk of untimely usage information data updates.