\u3000\u30 Beijing Zznode Technologies Co.Ltd(003007) 26 Zhuzhou Hongda Electronics Corp.Ltd(300726) )
Event: the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company realized operating revenue (RMB 2 billion, + 42.79%), net profit attributable to the parent company (RMB 816 million, + 68.68%), net profit attributable to the parent company after deduction (RMB 732 million, + 68.59%) and gross profit margin (68.73%, – 0.42pcts). In the first quarter of 2022, the company realized operating revenue (429 million yuan, + 13.09%), net profit attributable to the parent company (176 million yuan, + 2.69%), net profit attributable to the parent company after deduction (165 million yuan, + 9.36%), and gross profit margin (70.75%, + 0.52pcts).
Key investment points:
The company occupies a leading position in the subdivided field of highly reliable electronic components in China
The company is one of the leading enterprises in the subdivision field of highly reliable electronic components in China. Based on the traditional tantalum capacitor business, the company continues to develop the non tantalum capacitor business to solve the domestic substitution problems of electronic components and microcircuit modules in relevant fields. A number of product technologies are first or leading in China and are widely used in aviation, aerospace, ships, ground equipment, command system, communication system and other fields. In 2021, the company ranked 26th in the 34th comprehensive ranking of economic indicators of Chinese electronic component enterprises.
In 2021, the company’s downstream demand was strong and its performance continued to grow at a high speed
In 2021, the company realized operating revenue (RMB 2 billion, + 42.79%), net profit attributable to the parent company (RMB 816 million, + 68.68%), and net profit attributable to the parent company after deducting Non Profits (RMB 732 million, + 68.59%). The company’s performance growth mainly comes from three factors: ① China’s expenditure on high reliability projects has increased steadily, and the strong downstream demand has driven the improvement of the company’s performance; ② The company’s non tantalum capacitor product market has gradually opened, driving the rapid rise in sales of related products; ③ Benefiting from the acceleration of domestic substitution in China and the superposition of the company’s early investment and accumulation, the revenue of civil products continued to grow.
Business segmentation: the component business achieved revenue (RMB 1.716 billion, + 45.22%) and gross profit margin (70.09%, – 1.61 PCTs); Module and other product businesses achieved revenue (RMB 284 million, + 29.74%) and gross profit margin (60.49%, + 5.12 PCTs).
The company’s revenue of tantalum capacitor products increased steadily, and the revenue of non tantalum capacitor products increased significantly, becoming a new driving force for growth
Tantalum capacitor products: in 2021, the company continued to maintain its advantageous position in the industry and achieved growth. The operating revenue of tantalum capacitors increased by 36.47% year-on-year, of which the annual operating revenue of high-energy mixed tantalum products was close to 600 million yuan, reaching a new high.
Non tantalum capacitor products: in 2021, the company’s operating revenue of non tantalum capacitor products (830 million yuan, + 52.77%), accounting for 41.51% of the total revenue, has gradually become a new driving force for the company’s growth, among which the performance growth of ceramic capacitors, power modules, inductors and other products is more obvious. The net profit of Hunan Ceramic Co., Ltd. + 716800 yuan; Zhuzhou Hongda magnetoelectricity (main inductance) realized a net profit of 383437 million yuan, + 71.49%; Hunan Hongwei (mainly engaged in hybrid integrated circuits, micro packaging devices and circuit modules) realized a net profit of 323227 million yuan, + 52.62%; HTC Hengxin (mainly engaged in single-layer ceramic capacitors and thin-film integrated circuits) realized a net profit (302835 million yuan, + 172.16%). We believe that with the increasing number of projects and models entered by the company, the scale of non tantalum capacitor products of the company will continue to expand and become a new driving force for the growth of the company.
In 2021, the company’s expense control effect was remarkable, and the net interest rate increased
The company’s gross profit margin (68.73%, -0.42pcts) decreased slightly, while the company’s expense control effect was remarkable. The three expense rate (13.56%, -6.80pcts) decreased, driving the net profit margin (44.53%, + 6.76pcts) up. Among them, the sales expense rate (8.58%, -4.21pcts) and management expense rate (5.03%, -2.71pcts) continued the downward trend in recent years, The change of financial expense rate (- 0.05%, compared with – 0.16% in the same period of last year) is mainly due to the decrease of bank interest income. The company’s R & D expenses (RMB 125 million, + 51.87%) continued to grow, and the average annual compound growth rate of R & D expenses from 2018 to 2021 was 42.66%. In 2021, the company carried out 33 scientific research projects, including 31 government and cooperation projects and 2 self raised projects. Among them, new projects such as 6V compact inductor integrated synchronous rectification and step-down chip, MOS integrated overvoltage and overcurrent protection chip, high reliability inductor integrated synchronous rectification and step-down circuit and so on passed the appraisal of a third party. The company launched metal shell encapsulated polymer aluminum capacitor, and the ultra-thin large-scale solid-state aluminum capacitor was expanded to 75v15000uf, Polymer chip tantalum capacitors launch new products above 100V, which is conducive to the sustainable development of the company and consolidate the company’s leading position in technology.
The company’s inventory (829 million yuan, + 44.58%) increased, of which raw materials (264 million yuan, + 59.79%) increased rapidly, and the company actively prepared goods; Commodities issued (293 million yuan, + 12.19%) account for a large proportion (35.30%), which is expected to be cashed in the profit statement in the medium and short term. In addition, the net cash flow from operating activities (526 million yuan, + 104.77%) increased significantly, mainly due to the increase in the collection of accounts receivable and the due collection of commercial bills in the reporting period. The net cash flow from financing activities (940 million yuan, + 886.63%) increased significantly, mainly due to the raised funds received by the company from issuing A-Shares to specific objects during the reporting period.
In the first quarter of 2022, the net profit attributable to the parent company increased by 2.69% year-on-year, and the inventory increased by 41.45% year-on-year
In the first quarter of 2022, the company realized operating revenue (429 million yuan, + 13.09%), net profit attributable to the parent company (176 million yuan, + 2.69%), net profit attributable to the parent company after deduction (165 million yuan, + 9.36%), which continued to grow. The company’s gross profit margin (70.75%, + 0.52pcts) increased, and the expense control achieved results. The three fee expense ratio (10.42%, – 6.29pcts) decreased, while the net profit margin (45.00%, – 3.41pcts) decreased, which was mainly due to the decrease of 13 million yuan in government subsidies compared with the same period last year, the increase of bad debt reserves for notes receivable accrued during the reporting period and the increase of credit impairment loss (- 6.539 million yuan, + 331.68%).
In addition, the company’s inventory (957 million yuan, + 41.45%) increased rapidly, which we believe is related to the production and project acceptance of downstream customers due to the epidemic
The company raised 1 billion yuan for capacity construction to improve the current situation of capacity saturation
In 2021, the company raised about 1 billion yuan to invest in the construction of microwave electronic components production base and R & D center. After the project is completed, the company expects to add 2 billion ceramic capacitors per year and 1.5 million circulators and isolators per year. We believe that the company will continue to improve its current capacity and meet the needs of new customers under the background of investment and fund-raising projects.
Investment suggestions:
We believe that during the “14th five year plan” period, the downstream demand for high-reliability components increased clearly. Under the strategy of continuous development of China’s informatization, the number of informatization equipment and the value of unit equipment are expected to be further improved. As the main carrier of informatization development, high-reliability components have strong certainty of performance growth. The company will continue to increase its investment in scientific research of tantalum capacitors and benchmark international and Chinese advanced technology. The technical upgrading and product iteration of tantalum capacitor series products will consolidate the company’s market position. At the same time, the scale of the company’s non tantalum capacitor business continues to expand. With the increasing number of projects and models, the company’s performance will gradually increase in the future.
In addition, the company has raised funds for the capacity construction of microwave electronic components projects by issuing shares to specific objects, mainly improving the capacity of multiple products including ceramic capacitors, circulators and isolators, improving the current situation of capacity saturation, meeting the needs of existing customers, expanding new customers in various fields, and improving the profitability and comprehensive competitiveness of the company.
We estimate that the net profit attributable to the parent company from 2022 to 2024 will be 1.016 billion yuan, 1.252 billion yuan and 1.532 billion yuan respectively, EPS will be 2.47 yuan, 3.04 yuan and 3.72 yuan respectively, and the corresponding PE will be 21.5, 17.4 and 14.2 times respectively. Based on the industry position of the company and the future development prospect of products, we maintain the “buy” rating, with the target price of 70.02 yuan / share, corresponding to 28.3, 23.0 and 18.8 times of PE from 2022 to 2024 respectively.
Risk warning: the risk of decline in gross profit margin of highly reliable products and the risk of delayed delivery or acceptance affected by the epidemic
