Key points of investment
Core logic: leading thermal transfer carbon belt, large-scale expansion of production of high-end products, driving rapid growth in performance. As the main consumable material for bar code recognition applications, the global market size exceeds 10 billion, and has maintained steady growth. The company is a leading enterprise in the domestic heat transfer carbon belt field, with a global market share of about 5%, ranking fourth. It is the leader in China, and there is a lot of potential room for share increase. The company strengthened the competitiveness of high-end products such as mixed-base and resin-based products through the acquisition of Vicens Intelligence to achieve import substitution and global market expansion. The two sides have significant synergy effects in terms of technology, products and channels. With the rapid expansion of production of high-end products, the company's performance is expected to usher in rapid growth.
Key point 1: The global thermal transfer carbon belt market exceeds 10 billion dollars. The company has a strong competitive advantage Thermal transfer carbon tape is one of the consumables for heat transfer bar code printing. In 2021, the global thermal transfer carbon belt market was 11.06 billion yuan, maintaining an annual growth rate of about 5%. China's production capacity is dominated by mid- and low-end wax-based carbon belts. The middle and high-end resin-based carbon belts and mixed-base carbon belts are still dominated by Japanese, European, and American companies, and the domestic market relies on imports. Tiandi Digital already has strong competitiveness in the field of heat transfer carbon belts, with the highest domestic share and fourth in the world. It has the following advantages: 1) Technical advantages: the company independently innovates, masters core technology, and is the team leader unit for setting national standards; 2) Product advantages: The company has the advantages of complete product line, excellent performance and low cost. It is the largest domestic manufacturer of heat transfer carbon belts, which can better meet customer procurement needs; 3) Channel advantages: The company has been deeply involved in domestic and foreign channels for many years, and has various sales channels. Since 2009, the company has successively set up subsidiaries in overseas markets such as the US, the UK, and France, and is deeply involved in overseas markets. In 2023, the company's share of overseas revenue reached 64%.
Key point 2: The acquisition of Vicon Intelligence has significant synergistic effects. It is expected to drive high-performing companies to acquire 100% of Weissen Smart's shares in 2022. Vicon Intelligence focuses on the middle and high-end carbon belt fields such as hybrid and resin bases. Its technology and products are highly competitive, but it is relatively insufficient in terms of sales channels and production capacity. After the acquisition, Tiandi Digital empowered it in terms of channels and capital, and at the same time greatly enhanced the richness and competitiveness of its product line. The two sides achieved good synergy effects, with remarkable results. In 2023, the company's high-end products achieved rapid growth, and plans to significantly expand production, laying the foundation for future high performance growth.
Profit forecasting and valuation
We expect the company's net profit to be 0.9, 120, and 160 million yuan respectively in 2024-2026, up 54%, 44%, and 29% year-on-year, respectively, with a compound growth rate of 42%. The corresponding PE is 22, 15, and 12 times, respectively. Considering the company's high performance growth rate, it was given 35 times PE in 2024, with a target price of 19.5 yuan, covered for the first time, and given a “buy” rating.
Risk warning
Risk of fluctuations in raw materials and market prices; risk of core technology leakage; risk of exchange rate fluctuations and international trade.