Events:
The company released a half-year report on 2022: 2022H1 achieved revenue of 2.118 billion yuan (down 21.5% from the same period last year); realized net profit of 368 million yuan (down 27.2% from the same period last year); realized deduction of 201 million yuan from non-parent net profit (down 58.1% from the same period last year); realized gross profit margin of 23.70% (down 9.1pct from the same period last year); realized net profit rate of 17.50% (down 1.4pct from the same period last year).
In 2022, Q2 achieved revenue of 1.016 billion yuan (down 33.3% from the same period last year and 7.8% from the previous year), realized net profit of 188 million yuan (down 41.2% from the same period last year and 4.1% from the previous year), deducted 82 million yuan from the non-home net profit (down 72.8% from the same period last year and 31.2% from the previous year), and realized gross profit margin of 22.31% (down 12.4pct from the same period last year and 2.7pct from the previous year). Achieve a net interest rate of 18.55% (down 2.6pct from the same period last year, down 2.0pct from the previous year).
Comments:
Demand in the consumer electronics market continues to be weak, and the company's automotive electronics business is growing rapidly. Affected by the superimposed influence of multiple factors, such as the repeated epidemic situation of COVID-19, the persistent downturn in real estate, the structural lack of core, the conflict between Russia and Ukraine, and high commodity prices, the macroeconomic recovery was not as expected, the demand for consumer electronics markets such as home appliances and communications continued to be weak, and the company's sales of high-end products increased significantly compared with the same period last year, but overall, affected by the decline in market demand, both volume and price fell. The sales share of the communications and automotive electronics industries increased by 3 percentage points respectively compared with 2021, of which automotive electronics sales increased by 28.52% compared with the same period last year. The company's sales of high-end products continued to increase in the first half of 2022, with high-end MLCC and chip resistors rising from 30.26% and 28.37% in January to 40.80% and 43.43% in June, respectively.
It is expected that the price of consumer regulation MLCC will decline slightly in the second half of 22, while the price of automobile regulation will remain flat. Due to the volatility of the epidemic and the slow resumption of work in the manufacturing industry, the production gap caused by the epidemic in the first half of 2022 is difficult for ODM plants to fill in the second half of the year. On the demand side, downstream demand is sluggish, and demand is sluggish in the peak season in the second half of the year, resulting in a decline in MLCC demand and rising market inventories. According to TrendForce, the average inventory level of all sizes is more than 90 days, and it is estimated that MLCC prices in the second half of the year will be 30.6 per cent lower than in the first half of the year.
Keep up with the market changes and adjust the implementation progress of high-end capacitor construction projects. On August 19, 2022, the company issued an announcement that the new monthly production of 5 billion MLCC planned for the first phase of the project Xianghe has reached production. In the light of market changes and the actual situation of the project, the company has adjusted the overall implementation progress of the project, giving priority to significantly increasing the proportion of products in high-end market applications such as high volume, vehicle regulations and industrial control, in response to the strong demand in high-end market applications.
Buy back shares to motivate employees and enhance the overall value of the company. On August 19, 2022, the company announced a share buyback plan with a proposed repurchase amount of not less than 150 million yuan and no more than 300 million yuan. Based on the maximum repurchase price of 26.98 yuan per share, the estimated number of repurchased shares ranges from 555.97 to 11.1193 million shares, accounting for 0.48% of the company's current total share capital. 0.96%. The share buyback plan is used to implement the equity incentive plan and / or employee stock ownership plan to further improve the medium-and long-term incentive and restraint mechanism of the backbone team and ensure the realization of the company's long-term business goals.
Divest the marginal business and focus on the main business. (1) in August 2022, the company announced that it intends to transfer 99.88% of its shares in Guangdong Fenghua Core Power Technology Co., Ltd. to Foshan Guoxing Optoelectronics Co., Ltd., by way of agreement. This transaction constitutes a related party transaction. Fenghua Core Power Co., Ltd. is mainly engaged in semiconductor discrete devices and integrated circuits, and has less synergy with Fenghua High Technology. (2) in 2021, through public listing, the company introduced strategic investors to increase capital and shares of NEC soft Technology Electronics (Zhuhai) Co., Ltd., in order to divest the circuit board business. Through the divestiture of the marginal business, the company further focuses on superior resources to strengthen the main business of passive electronic components.
Investment suggestion: the company is the leading domestic MLCC manufacturer, raising funds to expand the production of MLCC and chip resistor business.
With the increasing demand of downstream market applications such as 5G, automobile electrification and intelligence, the application demand of electronic components is still growing. However, considering that (1) the MLCC scene is in a downward cycle and the product price is under pressure for 22 years, (2) Fenghua Hi-Tech is still in the state of production expansion and the expense rate is high. (3) due to the impact of the epidemic and the sluggish demand downstream, the operating rate of passive component manufacturers is relatively low. We have lowered the 22-23 net profit to 8.14 (- 39.7%) and 966 (- 43.4) billion yuan, with a 24-year net profit forecast of 1.197 billion yuan. Corresponding to PE 26X/22X/18X, the company is at the center of historical valuation low, maintaining the "buy" rating.
Risk hint: production expansion progress is not as expected, demand is not as expected, MLCC price fluctuation risk