Torch Electronics (603678) 2019 Third Quarterly Report Review-Q3 Accelerated Growth in Speed Is Still Optimistic for the Company’s Business Development Prospects

The company achieved revenue of 17 in the first three quarters of 2019.

2.7 billion (+19.

72%), net profit attributable to mother 2.

9.1 billion (+15.

twenty three%).

The company’s military MLCC boom continued to rise, affected by the decline in Q3 gross profit margin in the single quarter performance growth rate.

Considering that the company’s military products business may be affected by factors such as lower prices of downstream companies and the decline in gross profit margins caused by price reductions of some civilian products, we lower the company’s EPS forecast for 2019/20/21 to 0.

92/1.

16/1.

52 yuan, considering the company’s military MLCC and special ceramic materials development prospects, maintain the “Buy” rating, target price of 27.

5 yuan.

Q3 revenue maintained rapid growth, and gross margin growth led to performance growth.

The company achieved revenue of 17 in the first three quarters of 2019.

270,000 yuan, an increase of 19.

72%; net profit attributable to mother 2.

91 trillion, with an increase of 15.

23%; net profit after returning to the mother 2.

77 trillion, an increase of 27.

66%.

The company achieved revenue in the third quarter 6.

6.6 billion, an increase of 32.

88%, net profit attributable to mother 0.

77 trillion, with an increase of 1.

41%.

On the income side, the prosperity of military electronic components has continued to increase, and Q3 revenue has continued to grow rapidly; the profit side may be affected by the price of military products and the impact of price reductions in the civilian MLCC industry.

65pcts, ring than epoxy 10.

20.

Part of the R & D expenses incurred by the factor company Liya New Materials was recognized as other business costs and the accrual of interest income from large certificates of deposits, leading to a decline in the expense ratio during Q32.

51.

The company’s Q3 profitability was affected by the expansion of the gross profit margin, and the net profit margin was extended by 3.

60% to 11.

62%.

Inventory, advance receipt, advance payment and other indicators indicate that the military and civilian products orders are full, and the operating net cash flow shows a good trend.

Company inventory at the end of the reporting period 7.

1.7 billion, an increase of 32.

8%, an increase of 26 over the beginning of the period.

9%, of which the parent company’s military-dominated inventory increased by 29 per year.

3%.The factor company Suzhou Leidu received the advance payment from customers, which caused the company’s advance receipt budget to increase by 30 compared with the beginning of the period.

14%.

Due to the increase in the scale of Suzhou Leidu’s procurement, bill settlement increased, and prepayments increased by 133 from the beginning of the period.

7%.

The increase in inventories, advance receipts, and advance payments may indicate that the company’s stocks have increased and the order is full.

During the reporting period, the company received more cash for selling goods and providing services, and its operating net cash flow increased several times.

5%, the proportion of net profit attributable to mother increased from 17% in the third quarter of 2018 to 34%.

Continue to be optimistic about the development 淡水桑拿网 prospects of the company’s military MLCC and special ceramic materials.

Benefiting from the advancement of military informatization construction, the military reform affects the restoration of orders and the independent and controllable demand for upstream components. The company’s military MLCC business orders are conducive to continued improvement.

Some of the company’s special ceramic materials have first-mover technology, and try to fully seize the domestic market share under the background of foreign embargo.

Affected by the delivery of pyrolysis furnaces, heat treatment furnaces and other equipment, the date of special ceramic materials projects reaching the expected usable status was extended by one year to September 2020. Currently, three production lines have been completed and three are expected to be completed.After full production and sales are expected to increase by about 200 million net profit each year, bringing breakthrough marginal increase to the company’s performance.

Risk factors.

MLCC prices have risen sharply, new products have been ordered, and market development has fallen short of expectations.

Investment suggestion: Considering that the company’s military products business may be affected by factors such as the price reduction of downstream companies and the decline in the gross profit margin of some civilian products, we lower the company’s EPS forecast for 2019/20/21 to 0.

92/1.

16/1.

52 yuan, (the original forecast was 0.

97/1.

28/1.

66 yuan).

The company currently has a maximum of 21.

66 yuan, corresponding to 24/19/14 times the PE in 2019/20/21 respectively.

With reference to the estimated level of comparable companies and taking into account the development prospects of the company’s military MLCC and special ceramic materials, maintain the company’s “Buy” rating and adjust the target price 27 accordingly.

5 yuan (corresponding to 30 times PE estimate in 2019).