\u3000\u3 Shengda Resources Co.Ltd(000603) 678 Fujian Torch Electron Technology Co.Ltd(603678) )
Core view
Event: the company released its annual report for 2021. In 2021, the company achieved an operating revenue of 4.734 billion yuan, a year-on-year increase of 29.48%, and a net profit attributable to the parent company of 956 million yuan, a year-on-year increase of 56.83%.
The core supplier of military electronics and the self-produced ceramic capacitor business promoted the rapid growth of the company’s profits. The profit of self-produced ceramic capacitors accounted for 61.03%, an increase of 5.22pct over last year. Benefiting from the informatization and localization substitution of military equipment, the demand for ceramic capacitors is strong, and the compound annual growth rate will reach 12% in the next five years. The company is one of the leading military MLCC enterprises. In recent years, it has actively carried out the capacity layout of ceramic capacitors, which will fully benefit from the improvement of downstream demand, and its performance is expected to continue to rise in the future.
The research and development strength of ceramic materials is leading, and it is expected to become an important profit sector of the company. In 2021, the revenue and profit of the company’s ceramic materials business were 66 million yuan and 49 million yuan respectively, an increase of 34.80% and 42.28% over last year. The limit temperature that ceramic materials can withstand can reach 3000 ℃, which has obvious advantages compared with the temperature range of 760 ℃ – 1500 ℃ that superalloys can withstand. It is expected to be widely used in aero-engine combustion chamber materials, thermal protection sectors of supersonic aircraft and fuel cladding of nuclear reactor in the future. Casas-300, a special ceramic new material project of the company, has a series of technologies required for industrialization and is at the leading level in China. The market application of ceramic materials is gradually expanding and is expected to become another important profit sector of the company in the future.
The gross profit margin was further improved and the R & D investment was increased. The gross profit margin of the company was 35.52%, an increase of 3.67pct over the same period last year. The increase of gross profit margin was mainly due to the further increase of gross profit margin of self-produced business (+ 7.49pct), and the proportion in revenue also increased (+ 3.06pct). The company’s expense rate during the period was 9.94%, a decrease of 0.06pct compared with last year. Among them, the R & D expenses increased by 55.83%, which was caused by the company’s R & D innovation layout and continuously increasing R & D investment.
Repurchase is used for employee stock ownership plan to improve team cohesion and core competitiveness of the enterprise. The company will repurchase shares at a price of no more than 75 yuan / share for the implementation of the employee stock ownership plan. This share repurchase will continue the company’s equity incentive plan, which is beneficial to further establish and improve the company’s long-term incentive mechanism, attract and retain excellent talents, improve the cohesion of the team and the enthusiasm of employees, and provide talent guarantee for the long-term and steady development of the company.
Investment suggestion: we predict that the net profit of the company from 2022 to 2024 will be 1.275 billion yuan, 1.558 billion yuan and 1.952 billion yuan respectively, and the corresponding PE will be 18.0x, 14.7x and 11.7x respectively. Give a “buy” rating.
Risk tip: the price of ceramic capacitors is falling, and the market development of ceramic materials is less than expected.