\u3000\u3 Shengda Resources Co.Ltd(000603) 678 Fujian Torch Electron Technology Co.Ltd(603678) )
Key investment points:
Fujian Torch Electron Technology Co.Ltd(603678) 3 on the evening of March 22, the annual performance report was released: the operating revenue in 2021 was about 4.734 billion yuan, with a year-on-year increase of 29.48%; The net profit attributable to the shareholders of the listed company was about 956 million yuan, a year-on-year increase of 56.83%; The basic earnings per share was 2.08 yuan, a year-on-year increase of 54.07%. The distribution scheme is: cash dividend of 4.8 yuan (including tax) for every 10 shares, no bonus shares and no increase.
The self-produced business grew rapidly, and special ceramics and other electronic components went hand in hand
In 2021, the operating revenue was about 4.734 billion yuan, with a year-on-year increase of 29.48%; The net profit attributable to the shareholders of the listed company was about 956 million yuan, a year-on-year increase of 56.83%, and the performance was in line with expectations.
In terms of revenue structure, the self-produced electronic components business achieved a revenue of 1.523 billion in 2021, with a year-on-year increase of 43.01%; The agency component business achieved a revenue of 3.062 billion, a year-on-year increase of 23.86%; The special ceramics business achieved a revenue of 66 million, a year-on-year increase of 34.8%.
In 2021, the operating revenue of self-produced electronic components accounted for 32.17%, and the gross profit was 1.188 billion, accounting for 70.66% of the company’s overall gross profit, an increase of 6.16 PCT year-on-year. Self produced electronic components are the core source of profit contribution of the company.
In the business of self-produced electronic components, the operating revenue of self-produced MLCC was 1.256 billion, a year-on-year increase of 44.11%, and the operating revenue of tantalum capacitors, microwave components, resistors and other self-produced components was 260 million, a year-on-year increase of 39.86%.
The company actively expands the varieties of other electronic components and continues to make breakthroughs. Among self-produced electronic components, the proportion of non MLCC business has increased to 17.53%, realizing a good situation in which a variety of components have started to advance simultaneously.
The company’s subsidiary Guangzhou Tianji mainly produces, develops and sells microwave thin-film components. In 2021, the operating revenue was 173576800 yuan, a year-on-year increase of 37.48%; The net profit was 581898 million yuan, with a year-on-year increase of 44.97%. The company plans to be separated and listed independently
The revenue of special ceramic materials in 2021 was 66 million, with a year-on-year increase of 34.8%. The main business entities are two subsidiaries, Liya new material and Liya chemical. In 2021, Liya new material achieved an operating revenue of 1224939 million yuan, a year-on-year increase of 15.12%, and a net profit of 41.048 million yuan, a year-on-year increase of 26.54%. Liya chemical achieved an operating revenue of 51.704 million yuan, a year-on-year increase of 136.44%, and a net profit of 4.714 million yuan. Special ceramic materials have formed a stable supply capacity and are in the stage of gradual large-scale production.
In 2021, the company’s profitability continued to improve and the payment collection improved significantly
In 2021, the gross profit margin of the company’s overall sales was 35.52%, with a year-on-year increase of 3.67pct; The net interest rate was 20.63%, with a year-on-year increase of 3.38pct and deduction of non net interest rate of 20.04%, with a year-on-year increase of 4.01pct. The substantial increase in profitability is mainly due to the rapid growth of self-produced electronic components business with high gross profit margin, and the continuous increase of gross profit margin of self-produced components due to scale effect.
Gross profit margin of sub products: the gross profit margin of the company’s self-produced electronic components was 78.02%, with a year-on-year increase of 7.49pct, of which the gross profit margin of self-produced MLCC of core business reached 81.73%, with a year-on-year increase of 7.14pct. The gross profit margin of the company’s special ceramic materials was 74.44%, with a year-on-year increase of 3.91pct. The gross profit margin of acting MLCC business was 12.92%, down 1.02pct year-on-year. The gross profit margin of acting MLCC business is relatively low compared with other self-produced businesses of the company, which lowers the overall gross profit margin and net profit margin of the company.
In 2021, the company’s weighted roe was 22.41%, an increase of 4.63 PCT over last year.
In 2021, the company’s net operating cash flow was 594 million yuan, a year-on-year increase of 22.37 times, and the company’s payment collection situation improved significantly.
Share repurchase and equity incentive create a win-win ecosystem between the company and the backbone
The company attaches great importance to human resources and repurchases some shares of the company with its own funds through centralized bidding for three consecutive years for the implementation of employee stock ownership plan or equity incentive. In 2021, the Company repurchased 560600 shares with 30 million yuan. After the repurchase, the special securities account for repurchase held 1953300 shares in total. At the same time, the restricted stock incentive in 2021 was implemented, and 826800 shares (equity incentive price of 30 yuan) were granted to 147 core backbone personnel of the company to encourage employees to create good performance and achieve a win-win situation between the company’s benefits and employee performance. The performance assessment objective of equity incentive is to take the operation in 2020 as the standard, and the growth of revenue or net profit from 2021 to 2022 shall not be less than 30% and 69% respectively. (2-year compound growth of 30%). Higher incentive conditions also reflect the company’s confidence in future growth.
The company is a core supplier of military electronic components. The development of the company is supported by military components and special ceramic materials
As a key high-tech enterprise of the national torch plan and a national high-tech industrialization demonstration project, the company continues to carry out product optimization and new product research and development of electronic components, realize independent control of key technologies, and form a series of core technologies for ceramic capacitor manufacturing from product design, material development to production process. In the military market, as the first batch of enterprises to pass the aerospace product certification, the company undertakes a number of national military scientific research tasks and has established good cooperative relations with most military enterprises and institutions. In terms of civilian capacitors, the company has established a good brand image, user awareness and market reputation in the market by relying on the accumulation of technology, quality and service over the years.
Guangzhou Tianji owns independent and controllable ceramic dielectric material preparation technology and semiconductor film process. It is one of the few enterprises in China that realize the whole process from the preparation of ceramic, film and other dielectric materials to the production of microwave passive components. One of the core products, microwave chip capacitor and dielectric preparation technology “grain boundary layer dielectric substrate” has reached the leading level in China, and some achievements have reached the international advanced level.
Liya new material casas300 special ceramic materials has mastered a series of proprietary technologies for the industrialization of high-performance special ceramic materials by means of technology exclusive license, achieved a breakthrough from 0 to 1, and has a comprehensive product series coverage. It is one of the few enterprises with large-scale production capacity of ceramic materials in China.
Through in-depth layout of military electronic components and special ceramic materials, the company has mastered the core technology based on ceramic materials. Military components and special ceramics constitute the two poles of the company’s future growth and support the company’s long-term development.
Profit forecast and valuation
We predict that the operating revenue of the company from 2022 to 2024 will be 6.056 billion, 7.487 billion and 8.971 billion respectively, and the net profit attributable to the parent company will be 1.292 billion, 1.66 billion and 2.058 billion respectively, and the corresponding PE will be 18.66x, 14.53x and 11.72x respectively. Compared with other military components companies, the valuation of the company is relatively low. The valuation of the company is at the absolute bottom of history. It is covered for the first time and given a “buy” rating.
Risk tips: 1: the production and delivery progress of aviation equipment products is less than expected; 2: The growth rate of defense expenditure budget is lower than expected; 3: MLCC prices fell sharply; 4: The volume of special ceramic materials business was lower than expected.
