Core views

As one of the few high-tech enterprises in China that independently fully master the core technology of the entire metal soft magnetic powder, metal soft magnetic powder core, and high-end integrated inductor industry chain, the company has established a metal soft magnetic powder core system covering 5 kHz to 2 MHz frequency applications. With the gradual release of production capacity at Huidong and Heyuan bases and product iterative upgrades, it will continue to maintain the leading position of domestic metal soft magnetic powder cores in terms of scale and technology. Chip inductor products have been certified by many internationally renowned chip manufacturers, and have entered the mass delivery stage, and significant progress has been made in the technical layout of chip inductors in AI PCs, AI phones, wearable devices, etc.; in 2024, chip inductor production capacity will increase from 5 million pieces/month to 10-15 million pieces/month. The company plans to raise 0.3 billion yuan, with a total investment of 0.45 billion yuan to continue to build 0.2 billion chips/year of chip production capacity, laying the foundation for high future performance growth.

occurrences

Net profit to mother increased 38.18% in the first half of 2024.

The company released its 2024 mid-year report, achieving total revenue of 0.796 billion yuan, +36.88% year-on-year, and net profit to mother of 0.185 billion yuan, +38.18% year-on-year. Expenses, etc. were 99.8 million yuan, up 19.44% year over year. The company's net cash flow was 88.35 million yuan, up 30.01% year on year, of which operating cash flow was 0.12 billion yuan.

Brief review

The three growth curves are gaining strength simultaneously, and the chip inductor business has performed brilliantly.

In the first half of 2024, the company achieved revenue of 0.796 billion yuan, net profit of 0.185 billion yuan, and gross margin of 40.48%; of these, the second quarter achieved revenue of 0.461 billion yuan, +37.6% month-on-month, and 0.114 billion yuan in net profit to mother, +58.98% month-on-month, gross profit margin of 42.34%, up 4.43 pct.

In the first half of the year, the company's three main businesses worked simultaneously. Among them, metal soft magnetic powder revenue was 0.586 billion yuan, +7.03%; metal soft magnetic powder revenue was 0.014 billion yuan, +25.26% year over year; the chip inductor business entered a period of rapid growth, with sales of 0.195 billion yuan in the first half of the year, up 138.92% from 23H2, accounting for 24.5% of revenue.

The production capacity of metal soft magnetic powder cores and metal soft magnetic powder continues to expand, and product upgrades lead the industry.

The company has two production bases in Huidong and Heyuan. The Heyuan base was completed and put into operation with a production capacity of 0.02 million tons/year in 2023, and production capacity will be gradually released this year; the Huidong base will be upgraded, and production capacity will continue to increase. In terms of soft metal powder, the company is preparing to build a powder plant with an annual production capacity of 6,000 tons/year within 2023. It is expected that part of the production capacity will be released in the second half of 2024, and construction will be completed in 2025, contributing a new performance growth point. The company's magnetic powder core products have been continuously iteratively upgraded from the “iron silicon generation 1” to the “iron silicon 4 generation”, covering the 5kHz~2MHz frequency band application system. The company launched new NPV and NPC series products with leading performance. The upgraded products GPV and GPC series of NPV and NPC will be introduced to the market in 2024; in developing iron silicon 5th generation magnetic powder cores, loss has been further reduced by about 50% on the basis of iron silicon 4 generation. The leading product performance will further consolidate the company's leading performance position in the metal soft magnetic powder industry.

In the era of AI computing power, downstream customer certification of chip inductors continues to advance.

The company's chip inductor products cater to the trend of high power and small size, and complete the company's product line layout covering power conversion from the power generation end to the load side. Chip inductors play a role in supplying power to chip front-ends such as GPUs, CPUs, ASICs, and FPGAs. Chip inductors made of metal soft magnetic materials are more suitable for large computing power application scenarios such as GPUs, artificial intelligence, autonomous driving, AI servers, AI notebooks, communication power supplies, mining machines, etc., and the market prospects are broad. At present, the company's products have been highly recognized by world-renowned semiconductor manufacturers such as MPS and Infineon, and are indirectly sold to major global GPU chip manufacturers through semiconductor and system solution providers. At the same time, customer certification continues to advance, and new suppliers of many world-renowned semiconductor manufacturers have entered the list of suppliers.

Application scenarios for chip inductors are constantly being enriched, and new products are being developed to lay out the future market.

The company continues to develop new chip inductor products and has delivered a large number of samples to prepare for the development of a new incremental market. Among them, TLVR inductors suitable for AI server power circuits have been produced in small batches. The company's inductor has also made a series of significant advances in the technical layout of AI notebooks, tablets, wearable devices, automobiles, AI mobile phones, etc. IDC predicts that AI PC shipments will reach 54.2 million units in 2024, accounting for 21% of the total PC market, and will increase to 60% by 2028; AI mobile phone shipments will be 0.17 billion units in 2024, accounting for 15% of smartphone shipments. The company achieved production capacity of about 5 million pieces/month by the end of 2023. The market remains optimistic in 2024 and will continue to expand to 10-15 million pieces/month. The company's latest announcement is to raise 0.3 billion yuan (total investment of 0.45 billion yuan) to build a new high-end integrated inductor with a production capacity of 0.2 billion pieces/year, laying the foundation for high future performance growth.

Profit forecast and investment suggestions: The company's metal soft magnetic powder core business is developing steadily, and the production capacity release at the Heyuan base lays the foundation for performance; the metal soft magnetic powder production capacity will contribute part of production in the second half of 2024, contributing to a new performance growth point; the chip inductor business will enter a period of rapid development, and downstream customer certification will continue to advance, and chip inductor production capacity will increase from 5 million pieces/month to 10-15 million pieces/month. It is proposed to raise 0.3 billion yuan, with a total investment of 0.45 billion yuan to add 0.2 billion pieces/year production capacity As demand scenarios such as AI computing power, autonomous driving, and artificial intelligence grow, the chip inductor business has broad prospects. It is estimated that in 2024-2026, the company's revenue will be 1.84/2.24/2.66 billion yuan, and net profit to mother will be 0.42/0.52/0.63 billion yuan, corresponding to PE of 26/21/18 times. The company will grow at a high rate, giving it a “buy” rating.

Risk warning: 1. The company's performance growth mainly depends on the increase in production capacity of metal magnetic powder cores, and production capacity release is slowing down due to downstream PV inventory removal, and there is a possibility that shipments will fall short of expectations; 2. Demand for metal soft magnetic powder cores currently benefits from the increase in demand for photovoltaics, energy storage, and new energy vehicles. Among them, photovoltaics accounts for a large share. If downstream demand falls short of expectations, it will affect prices and affect performance; 3. The raw materials for metal soft magnetic powder cores are metals such as iron, silicon, aluminum, nickel, etc., and upstream raw material prices fluctuate greatly or affect costs, which in turn affects profitability; 4. Photovoltaics The energy and new energy vehicle market is greatly affected by policies , if industry policies change or affect market demand.