The performance was in line with expectations, and equity payment fees+inventory impairment affected profits. 1) 2022: Revenue of 700 million yuan, +38% year on year, net profit of 85 million yuan, +17% year on year, not 82 million yuan, +28% year on year, gross profit margin 38.85%, net interest rate 12.32% year on year, net interest rate 12.32% year on year, -2.1pcts year on year. 2) 22Q4: Revenue of 220 million yuan, +32% year on year, +9% month on month, net profit of the mother was 27 million yuan, +23% year on year, flat month on month, not 27 million yuan, +55% year on year, +8% month on month, gross profit margin 38.31% year on year, +2.60 pct year on month, net interest rate 12.47% year on year, -1.0pct year on year, -1.0pct month on month. The annual share payment fee was RMB 11.65 million. Inventory depreciation of 12.9 million yuan was calculated throughout the year, credit impairment was about 8.67 million yuan, and annual profit was reduced by 14.3 million yuan.
There is a surge in new energy sources in 2022, and the semiconductor and military industries are expected to explode. DC contactors/AC contactors/vacuum relays/vacuum capacitors/vacuum switch tube/contact groups/vacuum active devices accounted for 45%/16%/14%/6%/7%/3% of revenue in 2022. 1) New energy: DC & AC contactors and contact point groups are mainly used for new energy. DC contactors in '22 were 301 million yuan, +56% year on year, gross profit margin was 37%, -0.5pct year on year; AC contactors were 110 million yuan, +40% year on year, gross profit margin was 20%, -6pct year on year. The gross margin decline was mainly used for low margin products and high sales of low-voltage mining products; contact point groups of 0.5 billion yuan, +46% year on year, gross margin was 28%, +0.4pct year on year. 2) Military and semiconductors: Vacuum relays and capacitors are used in the military industry and semiconductors. Relays are 100 million yuan, +19% year on year, gross profit ratio is 68% year on year, -1 pct year on year; capacitors are 0.4 billion yuan, +11% year on year, gross profit margin 52%, +2pct year on year. Vacuum active devices are used in security screening radiation and major scientific projects, with revenue of 24 million yuan, +64% year on year, gross profit margin 50%, and -14pct year on year. According to the latest public records in February, the company's current order situation is good, contracts with major customers are being carried out normally, and demand for aerospace, semiconductors and new energy is constantly increasing.
New energy: Automobiles are driving passenger cars to open up space more than ten times, the wind storage industry has soared, and production capacity has been released to guarantee development.
1) Automobiles: Ceramic HVDC contactors, according to our estimates, the global market was 5.2 billion yuan in '22. The layout has been deployed for nearly 10 years, covering high-quality customers such as Tesla, Ningde Shidai, and Huichuan. The pace of industrialization and technical strength are leading in mainland China. In 2020, the commercial vehicle market in mainland China accounted for about 50%, and passenger cars were only about 10%. The switch to passenger cars in 2021 opened up more than ten times more space. 2) Wind and solar storage: DC contactors and vacuum AC contactors are used in photovoltaic inverters, wind power converters, etc. Customers are of high quality, and they are active after marketing to increase space. 3) Production capacity: The IPO fund-raising projects “HVDC Contactor Production Project” and “Electronic Vacuum Device R&D Center Project” have been delayed due to the epidemic, and construction is expected to be completed by the end of June this year. In addition, the company plans to raise 480 million yuan of convertible bonds, and 280 million yuan for new energy DC contactors, reaching 6.48 million after delivery, and 200 million yuan for AC contactors for wind and solar storage and flexible transmission and distribution, reaching 1.65 million after delivery.
Semiconductors: Core equipment components, the only local manufacturer, domestic substitution is accelerating.
Ceramic vacuum capacitors and vacuum relays, ceramic vacuum capacitors are used as RF power matchers for etching and thin film deposition machines. The company's product performance can be directly benchmarked against Swiss Comet and Japan's Meiteansha to accelerate domestic replacement. They have now been imported into Huachuang, Zhongwei, etc., and supply is in short supply. The combined revenue of Swiss Comet and Japan's Meidensha vacuum capacitors was about 5.5 billion yuan in 2021, and the company's product revenue in 2022 was 42 million yuan. There is huge room for replacement.
Military industry: Demand for domestic alternatives has exploded, and companies are expected to see a high increase. Starting with military products, they are fully qualified, and supply devices such as ceramic high voltage vacuum relays and DC contactors. The products are used in aerospace, vehicles, etc. Benefiting from the catalytic demand of the defense and military industry, the company is expected to achieve rapid growth in the context of localization.
Investment advice: The company is a leading electronic vacuum device manufacturer in mainland China. The technology is highly scalable. The downstream covers popular tracks such as new energy, semiconductor components, and military industries. It is optimistic that the new energy business will grow over the long term, and the military and semiconductor relay is expected to explode. Due to the impact of the epidemic in '22 and the release of production capacity fell short of expectations, the adjusted net profit for 23/24/25 was 1.8/27/40 billion yuan (previously expected net profit of 23/24 was 20/290 million yuan). The corresponding PE was 36/24/16 times, maintaining the “buy” rating.
Risk warning events: downstream demand falls short of expectations, production capacity release falls short of expectations, etc.