Key points of investment

According to TrendForce on May 28, global MLCC shipments are expected to increase 6.8% month-on-month to 1.23 trillion units in 24Q2, and the average BB ratio of suppliers will increase to 92%, an increase of 2.2 percentage points over the previous month.

Global MLCC shipments are expected to grow in 24Q2. The company's high-capacity MLCC volume can be expected. According to TrendForce data, benefiting from the steady increase in demand for AI server orders and the preparation demand for China's May Day holiday and 618 e-commerce festival, 24Q2 global MLCC shipments are expected to increase 6.8% month-on-month to 1.23 trillion units. In addition, due to the flat demand for orders from the ICT industry in the second quarter, OEMs and ODMs were conservative in their order planning for MLCC, so MLCC suppliers carefully controlled production capacity and inventory, leading to demand mainly for express orders, short orders, and delivery. The average BB ratio of MLCC suppliers in 24Q2 is expected to increase to 92%, an increase of 2.2 percentage points over the previous quarter.

In 2023, the company achieved revenue of 2.196 billion yuan, a year-on-year increase of 50.32%; gross profit margin was 32.43%, a year-on-year decrease of 12.43 percentage points. The company's MLCC products continue to develop in the direction of miniaturization, high volume, high frequency, high reliability, high pressure, etc., and continue to provide customers with high-value products and solutions. They have now achieved technological breakthroughs and complete mass production with a media layer thickness of 1 μm. The number of stacked layers exceeds 1000, and the products cover mainstream specifications from 0201 to 2220 sizes. High-capacity MLCCs for automotive use have now passed vehicle regulation system certification, and some specifications have begun to be introduced into the automotive supply chain. With product technology breakthroughs and quality improvements, the market recognition of the company's MLCC products has increased significantly, and downstream application fields are becoming more and more extensive.

There was a steady increase in performance in 2023, with 24Q1 gross margin improving the company's revenue of 5.727 billion yuan, up 11.21% year on year; net profit to mother of 1,581 billion yuan, up 5.07% year on year; net profit after deducting non-return to mother of 1,221 billion yuan, up 0.05% year on year; gross profit margin 39.83%, down 4.27 percentage points year on year; R&D investment of 546 million yuan, up 20.71% year on year.

24Q1 achieved revenue of 1,564 billion yuan, a year-on-year increase of 31.49% and a decrease of 3.53%; net profit to mother of 433 million yuan, an increase of 35.31% year-on-year and a decrease of 1.35% month-on-month; net profit after deducting non-return to mother of 378 million yuan, an increase of 57.40% year-on-year, and an increase of 10.19% month-on-month; and gross profit margin of 40.14%, with a slight increase over the same period.

New energy technology continues to improve, and the gross margin of communication components remains stable. The company has completed the entire technology chain from powder materials, single batteries, electric stacks to power generation systems. The newly developed 50kW SOFC cogeneration system is the same size and weight as the first generation of 35kW, the power density has increased by 43%, and reliability tests have been carried out over 2,000 hours. The initial power generation efficiency has reached 65%, and the cogeneration efficiency exceeds 90%. It is currently the SOFC system with the highest stand-alone power and power generation efficiency in China.

Communications components: In 2023, communications components achieved revenue of 1,987 billion yuan, a year-on-year decrease of 19.18%; gross profit margin was 40.40%, which was basically the same as the previous year. According to market demand, the company adjusts product strategy plans in due course, continuously carries out new product research and development, process improvement and cost control, continues to expand new specifications, develop product solutions adapted to market changes, meet customer needs, consolidate product market position, and maintain the steady development of the communication components business.

Investment advice: In light of the MLCC industry's inventory adjustment schedule, we adjusted our original 24/25 performance forecast. From 2024 to 2026, the company's revenue is expected to be 70.10/86.92/10.083 billion yuan (the original forecast value for 24/25 was 71.28/8.930 billion yuan), with growth rates of 22.4%/24.0%/16.0%, respectively; net profit to mother was 19.02/24.29/2,820 billion yuan (the original forecast value for 24/25 was 20.48/2,585 billion yuan), respectively, with growth rates of 20.3%/27.7%/16.1% respectively; PE 29.3/ 23.0/19.8 The company grasps the market opportunities brought about by MLCC localization and high-end technology, and continues to innovate MLCC technology. At the same time, the new energy business is becoming more mature as the second growth curve. Continued recommendation, maintaining a “buy-A” rating.

Risk warning: Downstream terminal market demand falls short of expectations; risk that new technologies, new processes, and new products cannot be industrialized as scheduled; market competition increases risks; systemic risks, etc.