\u3000\u3 Shengda Resources Co.Ltd(000603) 678 Fujian Torch Electron Technology Co.Ltd(603678) )
Event: the company announced on May 19 that it plans to spin off its holding subsidiary Guangzhou Tianji Technology (as of December 31, 2021, the company holds 51.58% of the shares of Guangzhou Tianji Technology) to be listed on the science and innovation board. In 2018, the company used 44.1 million yuan in cash to acquire 60% equity of Tianji technology. Since its integration with the company, Tianji technology has been showing a good development trend.
Fujian Torch Electron Technology Co.Ltd(603678) will further develop its main business, focusing element devices and new materials. On December 12, 2019, the CSRC announced several provisions on the pilot domestic listing of subsidiaries of listed companies under spin off, which pointed out that the spin off of listed companies is an important means for the capital market to optimize resource allocation and deepen the function of M & A, which is conducive to the company to further realize business focus, improve professional operation level, and better serve scientific and technological innovation and high-quality economic development. The company meets the relevant requirements of spin off Tianji technology for independent listing, including: 1) listing for three years; 2) Consecutive profits in the last three years; 3) After deducting the net profit attributable to the parent company of Tianji technology, the cumulative net profit attributable to the parent company in the last three years shall not be less than 600 million yuan; 4) The net profit attributable to the parent of Tianji technology in the latest year shall not exceed 50% of the company’s net profit attributable to the parent, and the net assets attributable to the parent shall not exceed 30% of the company’s net assets attributable to the parent. We believe that through this spin off and listing of Tianji technology, the company will further focus on its core main business and deeply cultivate the field of MLCC based components and new ceramic based materials in the aviation development industry chain.
Tianji technology will improve financing efficiency and accelerate business development. Tianji technology is mainly engaged in microwave thin-film components, forming a product matrix of four categories: microwave chip capacitors, thin-film circuits, microwave passive integrated devices and microwave dielectric frequency devices, which are applied to special fields such as radar, electronic countermeasure and satellite communication, as well as civil fields such as 5g and optical communication. Tianji technology has independent and controllable ceramic dielectric material preparation technology and semiconductor film process. It is one of the few enterprises in China that can realize the whole process from the preparation of ceramic, film and other dielectric materials to the production of microwave passive components. The core product “grain boundary layer dielectric substrate” has reached the leading level in China, and some achievements have reached the international advanced level. In 2021, the revenue reached 170 million yuan, with a year-on-year increase of 37.5%; The net profit was 58.19 million yuan, a year-on-year increase of 45.0%. From 2019 to 2021, the revenue CAGR of Tianji technology reached 58.9%; Net profit CAGR reached 67.9%. We believe that through this spin off and listing, Tianji technology will continue to enhance its financial strength, vigorously develop businesses related to microwave passive components and thin film integrated products, broaden financing channels and improve financing efficiency through direct connection with the capital market.
Investment suggestion: the company is one of the leading enterprises of special MLCC in China. During the “14th five year plan” period, with the improvement of equipment informatization and the acceleration of localization process, the company is expected to maintain rapid growth. At the same time, the company’s proprietary technology for the industrialization of high-performance special ceramic materials is the first in China, with high barriers and strong competitiveness. We expect the net profit attributable to the parent company from 2022 to 2024 to be 1.103 billion yuan, 1.362 billion yuan and 1.722 billion yuan respectively. The current share price corresponds to 17x / 14x / 11x PE from 2022 to 2024. Taking into account the sustained high prosperity of the industry and the growth potential of the company’s new material business, we give 20 times PE in 2022, with EPS of 2.40 yuan / share in 2022, corresponding to the target price of 47.98 yuan. Maintain a “recommended” rating.
Risk warning: the growth rate of downstream demand slows down; Less than expected capacity expansion; The epidemic situation has repeatedly affected production.
