Report summary:

A provider of overall thermal management solutions, with mass production capacity for mid-to-high-end thermal conductive materials, heat pipes, and thermostats. The company was founded in 2007. Its products cover heat pipes, heat transfer interface materials, graphite films, etc., and are used in consumer electronics such as laptops and smartphones, as well as security monitoring equipment, automotive electronics, and communication equipment. 2024H1 achieved total revenue of 0.457 billion yuan, a year-on-year increase of 1.23%; net profit to mother of 0.097 billion yuan, an increase of 46.40% year-on-year.

Mobile phone cooling: AI mobile phone power consumption has increased, and graphite+VC has become the mainstream flagship solution. Traditional mobile phones mainly use graphite film for cooling. As smartphones began the AI era, the power consumption of mobile phones gradually increased, and the penetration rate of hot plates gradually increased. The AI mobile cooling market is expected to reach 7.164 billion yuan in 2027. The VC heat sink process is complicated, and the manufacturing steps are precise. Suzhou Tianmai is deeply tied to domestic mobile phone manufacturers. In the first half of 2023, the mobile phone business achieved revenue of 0.293 billion yuan, with the share of Oppo, Vivo, Huawei, Honor, and Samsung growing to 32%. As a domestic VC leader, the company is expected to continue to benefit from industry growth in the future.

Computer cooling: The AI superimposed PC market is picking up, and computer cooling products are expected to see an increase in demand.

PCs mainly use heat pipes plus graphite film or air cooling modules. As major PC manufacturers around the world are expanding their AI PC product lines, it is expected to drive the growth of the cooling industry. The global computer cooler market reached $1.37 billion in 2022 and is expected to grow to $1.93 billion in 2029. The company has been deploying heat pipes for many years. In the computer business in the first half of 2023, graphite film achieved revenue of 10.79 million yuan and heat pipes achieved revenue of 13.53 million yuan.

Thermal interface materials: still dominated by foreign investors, there is broad scope for domestic alternatives. The global TIM market is expected to reach 7.6 billion yuan in 2026, with a CAGR of 5.57% in 2019-2026. The high thermal conductivity market is dominated by European, American and Japanese companies. The company's revenue in the field of thermal interface materials grew steadily, from 0.11 billion yuan in 2020 to about 0.18 billion yuan in 2022.

Profit forecast: We believe that the company is a leading domestic supplier of high-end heat transfer materials, and is expected to fully benefit from AI and ushered in a sharp rise in volume and price. Revenue for 2024-2026 is expected to be 0.977/1.283/1.643 billion yuan, up 5.3%/31.4%/28.0% year on year; net profit to mother is expected to be 0.2/0.241/0.288 billion yuan, up 30.0%/20.3% year over year. The target valuation for 2025 is 40 times, corresponding to a total market value of 9.6 billion yuan and a stock price of 83.39 yuan. First coverage, it is recommended to focus on it.

Risk warning: The consumer electronics boom cycle is weakening, and the share of major customers falls short of expectations