Event

The company publishes its 2022 semi-annual report. In the first half of 2022, the company achieved a total operating income of 633.2552 million yuan, an increase of 27.62% over the same period last year. The net profit attributable to shareholders of listed companies was 77.9415 million yuan, up 37.45% over the same period last year. After deducting non-recurrent profits and losses, the net profit belonging to shareholders of listed companies was 65.9652 million yuan, up 19.97% from the same period last year.

Brief comment

1. The semi-annual report has achieved relatively rapid growth, with a substantial increase in overseas revenue.

From a quarterly point of view, 2022Q2 achieved revenue of 341 million yuan, an increase of 24.92% over the same period last year; net profit belonging to shareholders of listed companies was 42 million yuan, an increase of 48.79% over the same period last year, and non-net profit was 35 million yuan, an increase of 22.87% over the same period last year.

From a regional point of view, foreign revenue in the first half of the year was 126 million yuan, an increase of 44.48% over the same period last year, accounting for 19.84%, and the increase in 2.32pct over the same period last year was mainly due to the strong competitiveness of the company's products and good cooperative relations with many overseas manufacturers around the world, and its popularity and credibility were highly recognized by customers.

From a business point of view, revenue from ceramic shells for communication devices was 471 million yuan, up 25.22 percent over the same period last year, while revenue from consumer electronics ceramic shells and substrates was 95 million yuan, up 132.6 percent from the same period last year, and revenue from automotive electronic components was 32 million yuan, down 36.72 percent from the same period last year.

We believe that the company's rapid growth in the first half of the year is mainly due to the continuous commercial promotion of 5G, the optimization of product structure and the continuous development of new areas. with the landing of asset restructuring in the future, the company's development is expected to add new momentum and performance is expected to achieve rapid growth.

2. The net interest rate has risen steadily, and the investment in R & D has been increasing.

In the first half of 2022, the company's gross profit margin was 28.14%, down 1.22pct from the same period last year, and the net profit rate was 12.31%. Compared with the same period last year, the company's gross profit margin and net profit margin were 27.28% and 12.40%, respectively, lower 1.46pct and higher 1.99pct.

In the first half of the year, the company's sales expense rate was 0.39%, down 0.35pct from the same period last year; the management expense rate was 3.53%, down 0.3pct from the same period last year; and the financial expense rate was-0.89%, down 0.43pct from the same period last year, mainly due to a substantial increase in exchange rate earnings brought about by exchange rate changes. The R & D expense rate was 13.49%, up 0.74pct from the same period last year. The company continues to increase investment in research and development to ensure its competitiveness in the industry in the future. The net cash flow of the company's operating activities was 10 million yuan, down 85.8% from the same period last year, mainly due to a substantial increase in cash payments for the purchase of goods by the company.

3. Domestic leading ceramic shell manufacturers, the main business is sound.

The company is a leading domestic ceramic shell manufacturer, with a full set of independent development capabilities of ceramic shell from simulation design, ceramic material and metallization system to multi-layer co-firing technology. The company's main ceramic shell products include optical communication device shell, wireless power device shell, infrared detector shell, high-power laser shell, sound surface crystal oscillator shell, 3D optical sensor module shell, 5G communication terminal module shell, aluminum nitride ceramic substrate, ceramic components, integrated heaters, etc. widely used in optical communications, wireless communications, industrial lasers, consumer electronics, automotive electronics and other fields. The company's products have strong competitiveness, and successfully realized the domestic substitution. At the same time, on the customer side, the company continues to open up new customers on the premise of establishing long-term strategic cooperation with existing core customers, and has become a supplier to a number of leading enterprises in the electronics industry at home and abroad. it is expected to provide a solid foundation for future development.

4. With the acceleration of asset reorganization, the company is expected to accelerate its development.

On August 28, 2022, the company issued the draft of acquisition and fixed increase, and the asset reorganization basically landed. The company plans to issue 8317.4 shares to acquire 73% equity in Bowei, 13 gallium nitride communication base station RF chip business assets and liabilities, and Guolian Wanzhong 94.6% equity, priced at 46.06 yuan per share. At the same time, the company raised no more than 2.5 billion yuan, used for "gallium nitride microwave product precision manufacturing production line construction project", "communication power amplifier and microwave integrated circuit R & D center construction project", "third generation semiconductor technology and closed test platform construction project", "silicon carbide high voltage power module key technology research and development project" and supplement the liquidity of listed companies or target companies. After the completion of this transaction, the company will add gallium nitride communication base station radio frequency chips and devices, microwave point-to-point communication radio frequency chips and devices, silicon carbide power module and its application business. We believe that the company's original electronic ceramics main business is sound, and the new third-generation semiconductor business has a broad market space, which is expected to accelerate the company's future development.

5. We suggest that we keep an eye on the company.

The company is the leading manufacturer of domestic electronic ceramics, breaking the monopoly situation of foreign manufacturers and successfully realizing domestic substitution. Electronic ceramics are widely used and have a broad market space. The company's main business operation is sound, the customer side continues to expand. At the same time, the third-generation semiconductor asset restructuring is accelerated, and new businesses such as gallium nitride and silicon carbide are highly competitive, which is expected to accelerate the development of the company. If the impact of asset restructuring is not taken into account, we estimate that the company's income from 2022 to 2024 will be 1.321 billion yuan, 1.712 billion yuan and 2.211 billion yuan respectively, and the return net profit will be 168 million yuan, 219 million yuan and 278 million yuan respectively. The current market capitalization corresponds to PE 121X, 93X and 73x, and is rated as "overweight".

6. Risk hints: the impact of the epidemic is higher than expected; the impact of exchange rate fluctuations is higher than expected; the demand of the optical communications market is lower than expected; the progress of asset restructuring is not as expected; the development of new business is not as expected; the consumer electronics market is not as expected; and the international environment changes.