\u3000\u3 Shengda Resources Co.Ltd(000603) 678 Fujian Torch Electron Technology Co.Ltd(603678) )
Key investment points
Special MLCC core supplier, with a compound growth rate of 33% and 42% in revenue and net profit attributable to the parent company in recent three years. The company has been deeply engaged in ceramic capacitor products for more than 30 years. It is a core supplier of special MLCC in China. The company's business can be divided into self-produced and trade sectors: the downstream of self-produced business is mainly for special industries; As the agent of foreign brands in China, the trading business company is downstream for civil industries such as communication, electronics, automobile, industry and so on. In 2021, the company's self-produced and trading business revenue accounted for 34% / 65% and gross profit accounted for 74% / 24%.
Special business: benefiting from the increase of equipment volume + consumption, the company is expected to grow at a compound growth rate of 28% in the next three years. According to the data of forward-looking Industry Research Institute, China's special MLCC market is expected to grow from 3.6 billion yuan in 2021 to 5.1 billion yuan in 2024, CAGR = 12%. The company's downstream aerospace and other high growth industries account for a relatively high proportion. With the increase of the consumption of electronic components under the information construction, the company's business growth will also be faster than the industry level. The special MLCC industry has double barriers of qualification and technology, and the competition pattern is tripartite. Hongming, Hongyuan and torch account for about 90% of the overall market share. The company is expected to fully benefit from the strong demand in the downstream.
Trade business: the cooperation between the company and international brands is stable, and the compound growth rate of the company is expected to be 12% in the next three years. According to the data of forward-looking Industry Research Institute, the global MLCC market scale will be 101.7 billion yuan in 2020, and the market scale is expected to reach 149 billion yuan in 2025, CAGR = 8%. The company has established stable cooperative relations with international first-line brands such as SunPower and AVX, and actively explore new product lines and emerging markets. It is expected to continue to benefit from the rapid development of downstream new energy vehicles, 5g and other industries in the future.
The company actively expands production and efficiency, and the profitability of the company is expected to continue to improve under the scale effect. In 2020, the company issued convertible bonds to raise 600 million yuan for production expansion. After the project is completed, the production capacity of 8.4 billion small volume thin dielectric layer ceramic capacitors will be added every year, and the downstream application of the company's products is expected to continue to expand. With the increase of production capacity, the current gross profit margin and net profit margin of the company have reached a record high under the scale effect. In the future, with the continuous promotion of lean production and management efficiency, the profitability of the company is expected to be further improved.
As one of the few enterprises with large-scale production capacity of special ceramic materials in China, casas300 technology and production capacity of third-generation special ceramic materials are in the leading position in the industry. In 2021, the company's special ceramic materials business revenue increased by 35% year-on-year. With the gradual release of production and sales, it is expected to become a new growth point of the company's performance in the future.
Fujian Torch Electron Technology Co.Ltd(603678) : the compound growth rate of net profit attributable to parent company is expected to be 22% in the next three years. The net profit attributable to parent company is expected to be RMB 1.15/14.3/1.72 billion from 2022 to 2024, with a year-on-year increase of 20% / 25% / 20%, CAGR = 22%, corresponding to 16 / 13 / 11 times of PE. For the first time, give a "buy" rating.
Risk warning: the fluctuation risk of gross profit margin of agency business; Price reduction risk of special products.
