Event: the company released its 2021 annual report, with revenue of 2 billion yuan, an increase of 42.79% over the same period last year, and a net profit of 816 million yuan, an increase of 68.68% over the same period last year. Among them, the operating income of the non-tantalum capacitor business was 830 million yuan, an increase of 52.77% over the same period last year, accounting for 41.51% of the company's total revenue, gradually becoming a new driving force for the company's growth. The company also released its quarterly report for 2022, 22Q1 achieved revenue of 429 million yuan, an increase of 13.09% over the same period last year, and a net profit of 176 million yuan, an increase of 2.69% over the same period last year.

The gross profit margin of modules and other products increased significantly, and the non-tantalum business expanded smoothly: in 2021, the company's overall gross profit margin was 68.73%, which decreased 0.42PCT compared with the same period last year, in which the gross profit margin of components business decreased 1.61PCT, or due to changes in product delivery structure and price fluctuations of civilian products; module and other products business gross profit margin increased 5.12PCT, reflecting the improvement of the company's overall profitability and smooth business development outside tantalum capacitors. 22Q1's overall gross profit margin was 70.75%, an increase in 0.52PCT compared with the same period last year.

Fund-raising projects to enhance the production capacity of non-tantalum business and promote the horizontal layout of products: the company issued a registration draft in September 2021, raising a total of 1 billion yuan, for microwave electronic components production base construction projects, R & D center construction projects and supplementary liquidity. After the production of microwave electronic components production base is reached, the company expects to increase the production capacity of ceramic capacitors and circulators and isolators by 2 billion / year and 1.5 million / year, with an annual increase of 506 million yuan in business income. The company caters to the needs of intelligent manufacturing and domestic substitution, seizes the development opportunity of new energy vehicles, 5G communications and other industries, horizontally expand non-tantalum business and cultivate new profit growth points.

Downstream demand continued to grow, and operating cash flow significantly improved: by the end of the first quarter of 22, the company's accounts receivable increased by 24.89% compared with the end of the previous year, mainly due to the company's revenue growth and simultaneous increase in accounts receivable. Prepaid accounts increased by 66.25% compared with the end of the previous year, mainly because the company purchased from suppliers in advance to prepare for follow-up production. Inventory increased by 15.45% compared with the end of the previous year, mainly due to the growth of the company's business scale and the increase in raw material stock and inventory goods. The net cash flow generated by the company's operating activities in 2021 increased by 105% compared with the same period last year, mainly due to the increase in product sales income, the return of receivables and the due collection of commercial bills.

Earnings forecast, valuation and rating: considering that there is some uncertainty about the expansion speed of the company's modular products and other businesses in new areas, we downgrade the company's profit forecast for 2022-23 by 7.24% soybean 14.06% to 10.08 / 1.241 billion yuan, and forecast a profit of 1.468 billion yuan in 2024, EPS will reach 2.45x3.01 pound 3.56 yuan in 2022-2024, and the current stock price corresponds to 2218x15x PE respectively. The company's business of non-tantalum capacitors such as ceramic dielectric capacitors and modular products has been well expanded in 2021, and the profit level is expected to continue to improve in the future. Maintain the company's "buy" rating based on current valuations.

Risk hints: the risk that sales of highly reliable products fall short of expectations; the risk of falling gross profit margins of highly reliable products; the risk that competitors' production capacity will be restored after the foreign epidemic has been gradually brought under control; the risk of falling prices and gross profit margins of civilian products; the risk that the progress of market expansion of new products is not as expected.