\u3000\u3000 Fujian Torch Electron Technology Co.Ltd(603678) (603678)
Event: Recently, the company issued the announcement of performance increase in 2021: it is expected to realize the net profit attributable to the parent company of 960 million yuan to 1.02 billion yuan, yoy + 57.51% ~ + 67.35%; Among them, the net profit attributable to the parent company from 2021q1 to Q3 is 780 million yuan, and the net profit attributable to the parent company in Q4 is 180 million to 240 million yuan, yoy-2.3% ~ + 30.3%. The performance forecast is in line with market expectations.
Optimize business structure and improve profitability. The company continued to implement the differentiated competition strategy, optimized the product structure, significantly increased the shipment of high value-added products, and improved the overall profitability. In the first three quarters of 2021, the gross profit margin was 36.04%, with a year-on-year increase of 4.61ppt; The net interest rate was 22.34%, with a year-on-year increase of 4.65ppt. At the same time, the company’s cost control ability has been continuously improved, and the overall cost rate has decreased during the period while continuously increasing R & D investment. In the first three quarters of 2021, the sales / management / R & D / financial expense rates were 2.45% / 5.27% / 1.89% / 0.51% respectively, and the expense rate decreased by -0.23ppt during the period.
The projects invested with raised funds are advancing smoothly, and there is no bottleneck in production capacity. The localization requirements of basic electronic components are constantly improving, and the downstream requirements for MLCC performance tend to be miniaturized, large capacity and high reliability. The situation that China’s high-performance MLCC is in short supply provides market space for the company’s fund-raising projects. In 2020, the company issued convertible bonds to raise 600 million yuan for production expansion and construction. As of 1h21, 160 million yuan has been invested in the project, and 34.8% of the progress has been completed. The overall progress is smooth.
The three sectors resonated and the demand boom continued. The company has 7 wholly-owned subsidiaries and 3 holding subsidiaries, forming three strategic patterns of “components, new materials and trade”. 1) Component sector: benefiting from the rapid growth of downstream demand such as special electronics, 5g communication, new energy and emerging industries, and superimposed with the strong demand for localization and substitution of electronic components, the company’s high component revenue will continue to be stable; 2) New materials sector: the company’s casas-300 special ceramic material technology is exclusively licensed. A series of proprietary technologies for the industrialization of “high-performance special ceramic materials” are pioneered in China and are the core competitiveness of the company. At present, the new material sector has formed a stable supply capacity, and the business volume has increased steadily in 2021; 3) Trade sector: the company carried out targeted business promotion, continued to increase cooperation with original customers, and increased order demand.
Implementation of equity incentive and cohesion of development power: the company completed equity incentive in 2021 and granted 826800 shares at the price of 30 yuan / share to 147 directors, deputy general managers, chief engineers, core backbone personnel and senior employees with more than 20 years of service. The equity incentive scheme is conducive to improving the enthusiasm of employees and providing guarantee for the steady development of the company.
Investment suggestion: we expect the net profit attributable to the parent company from 2021 to 2023 to be 987 million yuan, 1.364 billion yuan and 1.778 billion yuan respectively. The current share price corresponds to 30x / 22x / 17x PE from 2021 to 2023, which is at a historically low position vertically. Based on the comparison between the company’s historical valuation center and peer listed companies, we give the target price of 89.10 yuan according to 30 times of PE attributable to the parent company in 2022, corresponding to 41x / 30x / 23x PE from 2021 to 2023. We cover it for the first time and give it a “recommended” rating.
Risk warning: the growth rate of downstream demand slows down; Decline in gross profit margin, etc
