\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 60 Guangdong Faith Long Crystal Technology Co.Ltd(300460) )
The company is a leading enterprise of crystal oscillator in China and takes the lead in mastering the core technology of high-frequency products. The company is mainly engaged in MHz crystal oscillator products, including SMD resonator, TSX thermistor, TCXO temperature compensated crystal oscillator, etc. Its SMD2016 and smd1612 are earlier mass-produced crystal oscillator products in China, and smaller smd1210 products have also entered the trial production stage. The company’s products have obtained the certification of head manufacturers such as Qualcomm, Intel, MediaTek and Hisilicon, and become the company with the leading military high-end market in China. The company is one of the few manufacturers in the world who master the lithography process required for manufacturing high-frequency products, and has always been in the forefront of domestic enterprises in terms of “miniaturization and high-frequency”.
The development of 5g and Internet of things drives the demand for crystal oscillator, and domestic substitution provides a historical opportunity. In 2019, the global crystal oscillator market reached US $3 billion. The rapid development of emerging fields such as 5g, Internet of things and automotive electronics has brought a lot of demand for crystal oscillator. The superimposed epidemic has affected the production of overseas factories and the willingness of Japanese and Taiwan manufacturers to expand production, and the global crystal oscillator has a situation of short supply. China’s crystal oscillator market will grow from 15.5 billion yuan in 2020 to 26.3 billion yuan in 2026, with a CAGR of 9.2%. From the perspective of supply and demand, China’s demand for crystal oscillator has always been greater than the supply of domestic crystal oscillator, and many Chinese markets still use Japanese and Taiwan crystal oscillator products. The trade war has accelerated the domestic substitution process in the crystal oscillator industry. China’s top end customers have turned to Chinese crystal oscillator suppliers. There is a huge space for domestic substitution. The company has become a qualified supplier for high-quality customers such as Huawei and Xiaomi, and is expected to fully enjoy the industry dividend of domestic substitution.
High end products continue to make breakthroughs and obtain the certification of head manufacturers such as Qualcomm. In the era of 5g and wifi-6, high frequency and miniaturization are the future development trend of the industry. The company has made breakthroughs in TCXO oscillator and TSX thermal crystal. In 2020, more than 50% of the crystal oscillator sales revenue is contributed by device products, and the product structure is significantly optimized. The company’s 76.8mhz ultra-high frequency thermal products have passed Qualcomm certification and have provided products to Huawei, glory, ZTE and other manufacturers. For a long time, Chinese products can only compete on the low-end track without certification. Relying on the advantages of lithography technology and technology, the company took the lead in passing the certification of Qualcomm, MediaTek and other solution providers, and is qualified to supply end customers such as head smart phones. We believe that the company’s TSX thermal crystal products will increase by 120% year-on-year in 2022.
The downstream customer structure of the company was significantly optimized, and the Chongqing plant helped to improve the production capacity. The Chongqing plant of the company’s raised investment project is used to produce high fundamental frequency and miniaturized crystal oscillator products to meet the crystal oscillator needs of 5g, wifi-6 and Internet of things. After the phase I project of Chongqing plant is fully completed, the production capacity of 700800 million will be increased every year, increasing the total production capacity of the company by 80%, which has basically reached the production capacity by the end of 2021. The phase II expansion of Chongqing plant has also been started, with strong demand and capacity release. The company has strong certainty of future performance growth.
As a leading enterprise of crystal oscillator in China, the investment suggestion company fully benefits from the demand of crystal oscillator driven by the rapid development of 5g and Internet of things. In the context of domestic substitution, the company leads Chinese manufacturers in technology, products, customers and production capacity, and there is a huge growth space in the future. We expect the company to achieve operating revenue of 677 million yuan, 1019 million yuan and 1407 million yuan from 2021 to 2023, with a year-on-year increase of 74.68%, 50.43% and 38.06% respectively; The net profit attributable to the parent company was 150 million yuan, 200 million yuan and 305 million yuan, with a year-on-year increase of 641.61%, 33.82% and 52.35% respectively; At present, the PE corresponding to the stock price is 26.2, 19.5 and 12.8 times respectively, and the recommended rating is given for the first time.
The risk indicates that the downstream demand is lower than expected, the product price is lower than expected, and the promotion of the company’s new products and projects is lower than expected.
