Key points of investment
The leading domestic power fuse has maintained rapid growth in performance. The company was founded in 2007. Its products are mainly power fuses, accounting for more than 95% of revenue in the past 5 years. The downstream focus is on the NEV market. Among them, the NEV/wind storage sector accounts for 51%/37% of revenue, and covers various fields such as communications and rail. With technology and cost advantages, the company is deeply tied to leading companies such as Tesla, Ningde Era, BYD, Huawei, and Sunshine Power. The company's performance achieved rapid growth. In Q1-3, revenue was 760 million yuan, up 57%, and net profit to mother was 85 million yuan, down 10%. Among them, the impact of equity incentives and income tax was about 68 million yuan. If added back, the impact of equity incentives and income tax was about 68 million yuan. If added back, the gross margin remained 40% +, and the profitability performance was impressive.
The fuse circuit is small but beautiful, and new energy has become a key driving force, bringing new opportunities for domestic replacement. Fuses are small in size and effective, have core safety properties, and are irreplaceable in short circuit protection. Therefore, customers are less sensitive to price, and downstream demand continues to be steady. The advantage of fuses is the melt design, which requires extremely high reliability. The product has a high certification+scale barrier. Overseas brands have a first-mover advantage and occupy the top seven global shares in 2019, with a total market share of about 90%. In recent years, the rapid development of the new energy market has brought new opportunities for domestic brands: ① In the field of new energy vehicle power fuses, we expect the global market size to exceed 3.2 billion yuan, an increase of 21%, of which 800V accounts for 10% +, motivating fuses to start rapid growth; ② In the field of wind and solar power storage fuses, we expect the global market to exceed 3.9 billion yuan in 25, an increase of 17%.
With technology and cost advantages, accumulating high-quality customer resources, overseas +800V opens up room for growth.
The company has a rich range of fuses and multiple performance advantages. It uses direct sales methods for important customers, leads foreign brands in the development cycle, opens up a domestic substitution situation, and has a 55% share of the domestic automotive market. In terms of shipment volume, we expect the company to sell 4054/5219/68.22 million fuses in 23-25, an increase of 52%/29%/31%, achieving rapid growth. In terms of profit, the company uses a copper-silver melting solution for melts, and the key equipment uses independent research and development, which can achieve customized and flexible production. As the level of automation continues to improve, costs are expected to continue to decrease. In addition, the company has accelerated the overseas +800V layout, and the product profit level is better: ① Overseas 22 accounted for 3.9%/7.9% of revenue in the first half of the year, 23, and has entered the Tesla and Daimler supply chains, gradually opening up overseas popularity, and is expected to start releasing in 24-25 years; ② Incentivize the leading mass production schedule of fuses, achieving revenue of 0.15/019 million yuan in the whole of 22/23. With the launch of a large number of 800V models, it is expected to start growing rapidly.
Profit forecast and investment rating: Considering the 23-25 year equity incentive fee of 0.75/0.61 billion yuan, we expect the company's net profit to be 1.32/2.17/418 million yuan, an increase of -14%/64%/93%, corresponding to PE 45/28/14 times. Considering that the company is a domestic power fuse leader and the new product starts rapid release, we give the company 25 times PE in 25 years, corresponding to the target price of 158 yuan. The first coverage gives a “buy” rating.
Risk warning: technology iteration risk, market competition risk, downstream sentiment fluctuation risk.