, it should be said that MLCC is the basic component in the electronic technology industry. In fact, the moat of the MLCC industry is not high. It depends on scale and reducing costs is the core competitiveness.
But there is a company here, which belongs to the upstream of MLCC, mainly MLCC powder. Let’s talk about its logic in detail:
National porcelain materials (300285)
From the trend in the past year, the main reasons for the company’s doubled growth are as follows:
December 26, 2018, the company’s performance forecast doubled its growth by deducting non-recurring growth, and the company’s stock price began to double in 2019!
(1) Endogenous growth
In the main business of electronic materials, the company benefited from the strong demand for downstream MLCC in 2018, which led to the increase in volume and price of MLCC powder.
(2) Extended merger and acquisition
on the one hand is the company's layout of honeycomb ceramics that benefited from the "National VI" standard, and acquired Prince Ceramics and consolidated the performance;
on the other hand is to extend zirconia dental materials to the downstream of the industrial chain, acquire "Aierchuang" to consolidate the performance.
Although in 2019, due to the impact of destocking in the MLCC industry and the decline in Aierchuang's operations were slightly lower than expected, in 2020, the three highlights will make the company stand at the forefront again!
MLCC powder is recovering downstream: MLCC destocking ends and returns to the price increase cycle;
(The downstream MLCC price increase cycle peaked and fell in the third quarter of 2018, and ended in the Q3 of 2019, and entered the price increase cycle again in Q1 2020.)
Zirconium oxide downstream recovery: medical dentures are growing high, and demand for consumer electronic mobile phone back panels increases;
catalytic material: 2020 "National VI" standard first year.
1. The leader of MLCC formula powder, multi-dimensional layout to create a new material platform
The company's business is summed up in "3 major original businesses + 2 new layouts + 1 industrial chain extension":
3 major original businesses: 1, electronic ceramic powder (MLCC formula powder, etc.); 2. Ceramic ink; 3. Structural ceramic (nano-level composite zirconia material + high-purity ultrafine alumina material).
2 new layouts: 1, automotive exhaust catalyst (honeycomb ceramic); 2, electronic slurry.
1 industrial chain extensions: mergers and acquisitions are deployed in the downstream dental field of zirconia.
The three most interesting businesses are:
1, electronic ceramic powder (MLCC formula powder);
2, zirconium oxide (medical denture + consumer electronic mobile phone back panel);
3, automotive exhaust catalyst (honeycomb ceramic).
2. The annual report's increase of non-recurring items by 21% in line with expectations
The company's 2019 performance report showed that the performance of non-recurring items was 472 million yuan, an increase of 20.9% year-on-year, and the performance was in line with expectations. Among them, the revenue in Q4 2019 was 616 million yuan, an increase of 16.4% year-on-year, and the net profit was 142 million yuan, a decrease of 4.1% year-on-year.
2020 first quarter performance declined by 3.98%, mainly due to the decrease in sales collection and the increase in payment for purchasing raw materials.
main reasons:
The business of the biomedical materials sector is developing rapidly, and Shenzhen Aierchuang exceeded the 2019 annual performance commitment;
catalytic materials sector benefited from the National VI standard, and the sales of new products have gradually increased; although the electronic materials sector is affected by the destocking adjustment of the MLCC industry in the short term, the overall business is still on the rise.
performance growth rate declined mainly due to non-recurring gains and losses.
In May 2018, the company's private placement of 810 million yuan completed the acquisition of the remaining 75% of Shenzhen Aierchuang's equity. The fair value of the 25% of the shares held in Aierchuang changed, thus generating an investment income of 114 million yuan. In 2018, the company's non-recurring gains and losses were 153 million yuan, while in 2019 it was only 30 million yuan. The base factor led to a decline in the company's apparent growth rate of performance in 2019.
3. Future: All three highlights are put into full play!
1, MLCC formula powder: Benefiting from the recovery of downstream demand, it returns to the price increase cycle
(1) Sub-segment track: MLCC formula powder
MLCC (Multi-layer Ceramic Capacitors) chip-type multi-layer ceramic capacitor device, also known as "monolithic capacitor", is sub-segmented into: electronic components-capacitors-ceramic capacitors-MLCC, which accounts for the largest proportion in this sub-field.
capacitor passive components account for the largest proportion of output value, reaching 66%. The main functions of in circuits are to store charge, alternating filtering, bypassing, provide tuning and oscillation, and use it for differential and integral circuits, etc.
Among them, ceramic capacitors occupy the largest market share, about 43%.
Ceramic capacitors can be divided into three categories according to different structures: single-layer ceramic capacitors, lead-type multi-layer ceramic capacitors and chip-type multi-layer ceramic capacitors (MLCC). Due to its obvious advantages, MLCC is the most widely used and accounts for about 93% of the market for ceramic capacitors.
MLCC's main structure consists of ceramic dielectric, end electrode, inner electrode and coating.
(2) Industrial chain: The company is in the upstream raw materials part of the industrial chain, and its cost accounts for more than one-third
Ceramic powder is the most important raw material for MLCC and is also the raw material with a cost account for more than one-third. Its purity, particle size, and uniformity directly affect the final product quality.
(3) Industry status: Benefiting from the recovery of downstream demand, it returns to the price increase cycle
Currently, the global market demand for MLCC formula powder is 50,000 tons, of which 70% of the market share is self-produced and used, 30% of the formula powder needs to be purchased from external suppliers, and the outbound market demand is about 15,000 tons. In the downstream market of
formula powder, it is estimated that the global demand for MLCC will reach US$11.5 billion in 2020, and the production demand will expand to 4850 billion. The market size of China's MLCC is expected to reach 70 billion yuan in 2020.
①MLCC demand rebounds in both volume and price
5G background, the consumption of MLCC for a single device has increased significantly, and downstream demand mainly includes consumer electronics (mobile phones, 5G base stations, wearable devices), automotive electronics (automotive electronics and new energy vehicles), and military industry.
②MLCC returns to the price increase cycle
Since 2000, MLCC has experienced four major price fluctuations: 2001-2002, 2002-2004, 2006-2009, and 2016-2018.
The most recent price increase in 2016-2018 was mainly due to the supply contraction of Murata and Samsung , the two largest MLCC giants, and the stable growth of downstream demand, which supported the price increase. Especially in 2016, Samsung Electric stopped production for three months due to the 2016 Note 7 explosion accident. After resuming work, MLCC quality control was strengthened, and the product delivery cycle was extended, which directly led to a 30% expansion of China's demand gap.
In the secondary market, the stock prices of MLCC manufacturers also soared. Not to mention the three times the mainland manufacturer Fenghua Hi-Tech . From April 2017 to July 2018, the stock price of Taiwan Guoju rose from NT$90 to NT$1,310 in 15 months, an increase of more than 1,300%. After reaching the peak, it fell sharply until it stabilized and rebounded in the third quarter of 2019.
Taiwan Guoju is the world's largest passive component manufacturer, with its resistance production first in the world and MLCC production third in the world.
Therefore, it can also be seen from the stock price that the MLCC inventory destocking phase ended in the third quarter of 2019, and further returned to the price increase cycle in the first quarter of 2020.
(4) Industry competition pattern: absolute monopoly overseas, and the domestic market is still mainly low-end
① MLCC powder pattern: Japan monopoly, national porcelain masters core technology and accounts for 75% of the domestic market
Global MLCC formula powder is mainly concentrated in Japan. Japan Sakai Chemical is the world's largest MLCC formula powder manufacturer with a market share of about 28%. The United States Ferro and Japan Chemical ranked second and third respectively, with market share of 20% and 14% respectively. There are very few companies in China engaged in mass production and sales of MLCC formula powder.
National porcelain material is the first and second manufacturer in the world to successfully mass-produce nanobarium titanate powder using hydrothermal technology after Sakai Chemical. It is also the largest manufacturer in mainland China to mass-produce and sell MLCC formula powder to the outside world.
②Downstream MLCC pattern: Japan, South Korea and Taiwan monopolize, Fenghua, Sanhua, torch, etc. are mainly low-end
MLCC pattern is a very small number of Japanese, South Korea and Taiwan occupy 90% of the market, and mainland Chinese manufacturers are classified as others, and all are mainly low-end.
③ Guoci Materials vs. Fenghua Hi-Tech vs. Sanhuan Group vs. Torch Electronics
Sanhuan Group: Opening the downstream of the industrial chain, its performance and stock price elasticity is not as good as Guoci
0 It can be seen that Sanhuan not only lays out on the upstream materials of MLCC, but also opens downstream MLCC. The company's 2019 performance fell by 33.89% year-on-year, mainly due to the slowdown in overall demand in the electronics industry, and product sales declined.
However, in terms of upstream materials, national porcelain material domestic share has an absolute advantage. In terms of downstream MLCC, although Sanhuan Group is one of the only two manufacturers in China, its output is limited and it mainly has low-end large-size products.
Fenghua Hi-Tech : The product moat is not deep, it is difficult to replicate the last round of price increase
Minimization is always the trend. The main focus of MLCC in the future is small and high-end products, and A-share manufacturers do not have the ability to supply large quantities.
Fenghua Hi-Tech is mainly low-end products and may benefit from the huge increase in demand for MLCC, but it may be difficult to recreate the glory of the past.
Torch Electronics, Hongyuan Electronics: Military MLCC is the main one
It is expected that the domestic military MLCC market size will be 3.2 billion in 2020, far lower than the 9 billion in industrial (automotive electronics, Internet of Things) and 55.2 billion in consumer MLCC. It can also be seen from the stock price performance that when Fenghua Hi-Tech rose rapidly in 2018, Torch Electronics' stock price did not fluctuate significantly.
In summary, it is a strategy to settle for the second best and explore among upstream raw materials and auxiliary material suppliers.
2, Zirconium oxide (medical denture + consumer electronic mobile phone backplane)
(1) Zirconium oxide track: Most downstream applications are in the introduction period and growth period
Zirconium oxide (ZrO2) is an inorganic non-metallic material that is resistant to high temperature, corrosion, wear and low thermal expansion coefficient. It is widely used in structural devices, biomedicine, optical fiber electronics, automotive exhaust treatment and other fields, and most of the application fields are in the introduction period and growth period.
For the company, the downstream mainly benefits two aspects: one is medical dentures and the other is mobile phone back panel.
①Medical: Zirconia dental implant
Zirconia is currently the most advanced all-ceramic material in the world. The teeth produced are real, natural, wear-resistant, non-deformable, and have the best aesthetics and have excellent biological properties, but the unit price of the product is relatively high. According to statistics, the current price of zirconia porcelain teeth in the market of is between 4,000 yuan and 10,000 yuan, which is far higher than the prices of cobalt-chromium porcelain teeth, pure titanium porcelain teeth, etc. The penetration rate has a certain impact on the high price.
According to statistics, the global denture product market has exceeded 5 00 million /html for 5 years, with an average weight of about 2.8g per tooth. Considering other needs such as denture repair, the global market demand for zirconia for dentures is about 2,000 tons, and the market value is about 4 00 million.
②Customer electronics: Mobile phone ceramic back panel
Ceramic back panel is expected to occupy an important position in the high-end mobile phone market with its special advantages. 5G and wireless charging technology have become the main trend of smart phone development at present. Due to the electromagnetic shielding of the metal back cover, its application in the mobile phone back panel is limited. Compared with non-metallic materials such as plastic materials and glass materials, the ceramic back cover has the advantages of high hardness, wear-resistant anti-scratch , and good heat dissipation performance, and can provide an integrated case solution.
However, the price of ceramic back panel is relatively high, about 5 times that of glass back panel 2 html, and its development has been affected to a certain extent.In the future, as production capacity expands and product yields increase, the cost of ceramic backplanes is expected to drop significantly in the next five years from 2 to 3 html.
(2) Industry development status
① Medical denture
Benefiting from aging and consumption upgrading, my country's dental materials industry will usher in rapid growth. It is estimated that by 2025, the market space for zirconia in the dental implant field in my country will reach 3.9 billion yuan, and the market space for ceramic dental implants will reach 72.5 billion yuan.
company acquired Aierchuang, the main supplier of domestic dentures, to achieve downstream resources integration, and its performance commitment exceeded expectations. In June 2018, the company completed the remaining 75% acquisition of Aierchuang. Aierchuang is one of the company's main customers of nano-grade composite zirconia products and one of the largest professional manufacturers of zirconia high-tech ceramics in China. Aierchuang's market share accounts for about 50% of domestic zirconia ceramic teeth. Aierchuang promised 90 million in 2019, and its actual net profit is expected to exceed 100 million yuan, exceeding its performance commitment.
②Ceramic back panel for mobile phones for consumer electronics:
In 2019, the focus will be on the release of smart watch space. It is expected that the total demand for ceramic powder by 2022 will be about 15,000 tons. According to the current calculation of 300,000 zirconia/ton, the market for zirconia for back panels will reach 4.5 billion.
company joined hands with Lens Technology to become a first-class supplier. Company maintains good cooperative relationships with downstream customers such as Lens Technology, Born Optical , Shunluo Electronics, etc. In December 2017, the company cooperated with Lens Technology, the leader in glass cover plates, to establish a joint venture Lens Guo Porcelain New Materials. Sufficient customer resources are expected to continue to support profits.
(3) Industry competition
The global market size of nano-scale composite zirconia is about 10 billion. Due to the high technical threshold of , manufacturers are mainly concentrated in Europe, the United States and Japan, such as Saint-Gobain, Japan's No. 1 Element, Japan's Toho, etc., and there are few domestic enterprises, and the localization rate of is extremely low, with about 95% from imports.
At present, only a few domestic manufacturers can produce nano-scale composite zirconia. Relying on years of research and industrialization experience in hydrothermal technology, the company has successfully developed hydrothermal synthesis and supercritical synthesis technology of high-dispersed nano-zirconia powders to mass produce nano-scale composite zirconia products. Chinese porcelain material has entered the field of mid-to-high-end application, and its products are leading in China.
3, automotive exhaust catalyst carrier (honeycomb ceramic)
(1) Automotive catalyst track: National VI standard First year, honeycomb ceramics are expected to explode
honeycomb ceramics support plays a skeleton support in automotive catalysts . Because honeycomb ceramics have relatively obvious performance and cost advantages, they are currently the most widely used automotive exhaust treatment catalyst carrier. National VI standard will be implemented in 2020, and some provinces will implement it in July 2019, which will be more than 40% to 50% stricter than the National V limit. It is currently one of the strictest emission standards in the world.
(2) Industrial chain: in the front-end exhaust gas treatment
internal combustion engine exhaust gas after-treatment system industry chain, honeycomb ceramic carrier is in the upstream position, and the catalyst coating manufacturer directly uses the downstream , and finally it is used in terminal customers internal combustion engine host manufacturers, vehicle manufacturers or shipbuilders, etc.
(3) Industry scale growth rate: 10 billion market, demand doubled compared with the National VI standard of "National V"
under the National VI standard, the demand for honeycomb ceramics is 2.1 times that of the promulgation of the National VI . It is estimated that the overall market demand for honeycomb ceramics in my country's automobile industry is expected to reach 260.1 million liters, and the market space exceeds 11.9 billion yuan.
(4) Competitive pattern: Prince pottery (acquisition of China porcelain) vs. Aofu Environmental Protection
Currently, the two overseas giants of global honeycomb ceramic carriers are Corning and NGK companies, with a concentration of CR2 of 90%. Domestic honeycomb ceramic carrier companies have few small scales, mainly including Aofu Environmental Protection , Yixing Chemical Machine, Prince pottery (acquisition of National porcelain material ), , Chiron Blue Feng and other .
Judging from the announced expansion products, Corning & NGK is targeting gasoline vehicle products that pay more attention to quality and are insensitive to costs, and obtain higher returns in the relatively high-end product market. This also provides a good market environment for domestic companies to occupy the mid- and low-end markets.
In terms of scale in China, the market share of Prince pottery acquired by Aofu Environmental Protection and National Porcelain Materials on the Science and Technology Innovation Board is equivalent, both of which are around 1%, and there is a lot of room for domestic substitution.
From the perspective of the moat, in terms of the National V certificates approved, Aofu Environmental Protection 2 are far higher than the 13 prince pottery made,
National VI model number is inspected, Aofu Environmental Protection leads the Prince pottery made with 14 prince pottery. Therefore, Aofu Environmental Protection should be better in technology.
Look at the finances again. According to the performance report, Aofu Environmental Protection had revenue of 268 million in 2019, of which 90% of its businesses were cellular ceramic carriers, and the corresponding revenue was about 240 million. Guocai Materials revenue was 2.15 billion yuan, and catalytic materials accounted for 7.64%, and the corresponding revenue was about 160 million yuan, which is smaller than Aofu Environmental Protection .
In summary, Aofu Environmental Protection should be the leading brother in the automotive industry, and the second brother in the acquisition of National Porcelain Materials .
4. There are many mergers and acquisitions, and there are many goodwills, but the subsidiaries have good quality and low impairment risk. It should be noted that Guoci Materials has so many mergers and acquisitions. In 2018, the goodwill exceeded 1.5 billion, accounting for nearly 40% of the company's net assets. The goodwill is mainly concentrated in the two subsidiaries, Prince Pottery and Aierchuang.
However, both companies have exceeded their performance commitments, and it is still very promising to achieve their performance targets in the future. However, considering that the Ministry of Finance is becoming increasingly strict in terms of goodwill impairment regulations, we have a slight risk warning.
Performance valuation forecast:
Reiterate the company's three major performance incremental highlights:
1, MLCC formula powder accounts for 75% of the domestic share, benefiting from MLCC returning to the price increase cycle, upstream raw materials have advantages over downstream MLCC companies, both in terms of market share and technical barriers. Fenghua Hi-Tech is not deep in product moat and has a history of financial fraud, it is difficult to reproduce the three-fold glory of 2018.
2. Zirconia: In terms of medical dentures, it acquired domestic leader Aierchuang and merged (some people even used Aierchuang to benchmark Tongce), and their performance commitments exceeded, and the future benefits of aging and consumption upgrading are promising. In terms of the back panel of consumer electronics mobile phones, 5G and wireless charging technology accelerate the withdrawal of metal back covers from the market, and the advantages of ceramic back panels are obvious. Joining forces with Lens Technology is expected to continue to make profits.
3. Automotive catalyst: In the first year of the implementation of the strictest standards of "National VI", the market space of 10 billion yuan is blue ocean, and the acquisition of Prince pottery exceeds the performance commitment, benchmarking the Science and Technology Innovation Board, Aofu Environmental Protection , at least the second brother in the domestic leader.
2019 performance report net profit of 500 million yuan. Combined with the current total market value of 22.8 billion yuan, the corresponding PE is 45.6 times, and the valuation is not high.
Considering the above three major performance incremental highlights, and the MLCC price increase cycle is longer and the 5G cycle is longer, which will continue to benefit. Assuming that the expected performance in 2020 is more than 600 million, the valuation is 40 times, and the expected market value is about 25 billion, and the intervention time is less than 24 yuan.
