Last month, Guoju announced the acquisition of two sensor divisions in one go, totaling more than US$700 million, which is another significant figure.
In 2018, the annual keyword of Guoju in people's minds was "price increase" and "franchise".
Guoju is a major global MLCC manufacturer. Its chairman Chen Taiming took the opportunity to harvest the mid- and low-end MLCC market from 2017 to 2018, and significantly increased prices and greatly extended delivery times, MLCC bundled sales, and the unsigned increase of 50%...
A series of speculations have led to the rise of Guoju's money bags, and the stock price of has increased by more than ten times in just one year.
In 2020, Guoju spent a huge amount of US$1.8 billion to successfully acquire Jimei, and Guoju jumped to the third largest passive component factory in the world.
1 From 994 to 2006, Guoju has successively acquired more than 11 companies, and has successively acquired 12 companies in the past six years. The amount of mergers and acquisitions in the past three years has exceeded NT$90 billion... Behind the scenes is the large investment of Boss Chen, the "passive component world merger king" .
In just two or three years, Guoju increased from 13% of global MLCC in 2019 to 15%, surpassing Japanese factory , Sunsuodian , ranked third in the world. In terms of , the market share of has increased from 24% to 34%, ranking as the global leader in resistors.
In terms of passive components, the only four companies that are truly competitors and products that are similar are Japan Murata, TPK, American Littelfuse, VISHAY, etc. In other fields, Guoju and Hon Hai work together to cut into power and analog chips, and this time they also entered sensors.
Have you changed dramatically? In fact, it has not changed, it is just moving step by step towards its electronic components empire.
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Guoju: I have become richer and stronger
Passive components are the cornerstone of the electronics industry, with high barriers and large room for growth. For example, a 5G mobile phone uses more than 1,000 MLCCs, and a pure electric vehicle uses 18,000 MLCCs.
Among them, Guoji holds the highest barrier and largest MLCCh (capacitor) in one hand, and monopolizes the global resistor market with the other. Today, the global MLCC market share has increased to 15%, surpassing Japanese factory Sunway Power Ranking No. 3 in the world. The market share of resistors has increased to 34%, ranking as the global leader in resistors.
In the "contempt chain" in MLCC, special products (also known as niche products) and standard products, both of which correspond to industrial control, automobiles, and consumption respectively. The gross profit margin of standard products is generally below 30%, and the gross profit margin of special products for high-end applications is generally above 35%, with high added value.
Before 2017, Guoju's special products and standard products were 3:7. Now the special products have increased significantly, and this ratio has become 8:2, which is a strong reversal, one step closer to the high-end MLCC.
Guoju's revenue in 2020 year-on-year growth rate of is as high as more than 60%. In contrast, the Japanese and Korean MLCC manufacturers have single-digit growth and even negative growth.
Source: Founder Securities
Previously, Guoju's large-scale acquisitions of Meilei (Taiwan's second largest inductance manufacturer) , Pusi, Jimei (the world's largest tantalum capacitor market share) and other manufacturers have brought unprecedented revenue growth. By October 2021, Guoju has acquired 10 companies in the past five years.
After Guoju officially integrated into the US in July 2020, its revenue exceeded 50% annual growth rate for two consecutive years. EPS (earnings per share) jumped from 16.35 yuan in 2019 to 25.52 yuan and 46.46 yuan. In June 2021, the inductor factory Qilixin (the global inductor market accounts for the third largest inductor market) . The two officially merged their financial reports at the beginning of 2022, giving Guoju a "big tonic" revenue.
Guoju's quarterly financial report performance in 2021-2022 hit a record high:
021 Q1: March revenue was NT$8.726 billion, the strongest March revenue report card in history. The cumulative first-quarter revenue soared the second highest record in a single quarter with NT$23.744 billion. With the support of Ki-Mei, html has an annual growth rate of up to 137%.
021 Q2: Thanks to the continued booming terminal demand, the company's revenue in June reached NT$9.505 billion (approximately RMB 2.21 billion), a monthly increase of 3.3%, an annual increase of 109.4%, and hit a 33-month high.
021 Q3: The consolidated net revenue in the third quarter was 29.386 billion yuan, a quarterly increase of 6%, and an increase of 33.8% over the same period last year. set a record for the highest revenue in a single quarter.
022 Q2: The consolidated revenue of a single quarter was NT$31.322 billion, an increase of 3.9% over the previous quarter and an increase of 13.0% over the same period last year, the company's has been a record high in the past years.
022 Q3: Guoju's revenue in September paid a report card of 10.181 billion yuan, and has stood firm for 10 billion yuan for the seventh consecutive month, with both annual and monthly growth, with cumulative revenue of 30.767 billion yuan, the third highest record in a single quarter, with a quarterly decrease of 1.9%.
Jimi's tantalum capacitor, Qili New inductor, Pusi's niche product line, Meilei's niche inductor, etc. Among them, there are many special products that are not easily affected by the economic fluctuations and high-end market , which have brought stable support to Guoju's operations.
Even with this year's conflict in Russia and Ukraine, epidemic lockdown, inflation, consumer electronics prosperity reversal , and continuous inventory adjustment, the revenue of peers has declined sharply, but Guoju's total revenue in the first three quarters still increased by 14% year-on-year and profits in the first half of the year increased by 7%.
In addition to the passive component track, Guoju is also coveting a larger market to improve risk resistance . The two sensor business acquisitions announced in October will increase Guoju's industrial revenue to about 36% (31% last year) . It declares that Guoju is no longer just a leading enterprise in the field of traditional passive components, but is also involved in more widely used electronic components.
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htmlRevenue has exceeded 100 billion in more than 130 years,
Where does the capital come from?
The high-end product portfolio has indeed made Guoju eat "cream on the cake", but it is necessary to not stopping to enclose land with large-scale land, so it is necessary to have a steady stream of capital. So, where does Guoju’s capital come from?
Guoju was founded in 1977 by Chen Taiming's eldest brother Chen Muyuan. In 1989, the Taiwan Impedance Company, founded by Chen Taiming, was merged into Guoju, and Chen Taiming became the general manager of Guoju. , under the hands of Chen Taiming, mergers and acquisitions have almost run through Guoju's development footprint.
In the 1990s, Guoju expanded the product lines of resistors, capacitors, and inductors through mergers and acquisitions of Singapore ASJ, Germany Vitrohn, Taiwan Zhibao and Qilixin, and fully entered the field of passive components.
In May 2000, Guoju acquired the time-honored Philips passive component department for 650 million euros, setting a record for the highest amount of overseas companies for Taiwanese listed companies. In addition to the passive component industry, Guoju also invested heavily in upstream, midstream and downstream business partners such as Shenbao, Zhifu, Meige, and Huanbang.
Every subsequent merger and acquisition has allowed Guoju to achieve a qualitative change in its growth. Under the basis of its own industry, Guoju continues to swallow small capital, eliminating a certain range of industry competition, gradually forms a monopoly on passive components, and the pricing power of products is rising year by year. thus has more capital to "buy, buy, buy, buy" and further improve competitiveness.
017-2018, Japanese and Korean MLCC manufacturers began to focus on the high-end market. Guoju made money by harvesting the mid- and low-end markets in mainland China, and the price increase letter was slim.In addition, the terminal demand for mining machines, wireless charging, intelligent driving, Internet of Things, smart speakers, etc. has exploded, and the demand for passive components has skyrocketed, and the price of MLCC in the spot market has surged by more than ten times.
Guoju also gave 70% of production capacity to agents and 30% to large factories, making the price difference, forcing large factories to sign long-term contracts with Guoju, leading other passive component manufacturers to copy homework, and opening the era of getting rich by roasted goods led by Guoju.
is contrary to this wave of operations. In the early years, Guoju also relied on the real-time delivery system (customers do not need to place orders in advance, and the inventory should be stocked by Guoju). innovation, and achieved a good market share of more than 70% in the chip resistor market in Taiwan, and became a leading manufacturer of a single product.
Obviously, Guoji has made great strides through the initial stage and transformed into an international manufacturer.
In the second half of 2020, with the recovery of the epidemic, demand for 5G, automotive electronics and other fields surged, and the supply of products exceeded demand. Passive component manufacturers "welcome" a new wave of price increases. Since the beginning of 2021, these manufacturers have successively announced price increases, and China has raised the resistance price by 15%-25%.
The expanded business territory and monopoly in the market segment have allowed Guoju to continue to fight the decline in profit margins. In 1989, Guoju's revenue was only NT$24 million, and by 2010, it had exceeded NT$25 billion, and exceeded NT$106.544 billion in 2021, reaching NT$106.544 billion, with a growth rate of world-class.
In 2019, media reported that Guoju's profits had soared for six consecutive years at that time. Judging from the cash flow that makes at least one equity capital each year, plus some financing , Guoju's cross-border mergers and acquisitions are still more than enough.
How much capital does Guoju have to "buy, buy, buy"? In the changes in Guoju’s financial report from 2017 to the present, we can try to get a glimpse of the clues through changes in its revenue and data changes in growth rate, gross profit margin, cash flow statement and other data.
Revenue growth rate - reflecting changes
Guoju's revenue in September paid a report card of 10.181 billion yuan, and it has been firmly in the seventh consecutive month, with both annual and monthly growth. Although standard passive components continue to destock , high-end demand continues to be stable, resulting in a slight increase in consolidated revenue in September compared with last month.
In November 2019, Guoju spent a huge amount of US$1.8 billion to acquire Jimei, which is reflected in the cumulative annual growth rate between November 2019 and April 2020. However, Guoju "squat first and then jump", and the negative growth rate shrank month by month, and the later growth rate made full efforts, reaching a high of 150% in February 2021. This stable explosive growth directly made up for the temporary decline during the acquisition.
Gross profit margin high - reflecting competitiveness
Under the trend of getting rich from 2017 to 2018, coupled with the acquisition in the first half of 2018, Guoju's gross profit margin in 2018 Q3 reached the highest 69% in history. The high point second only to 69% occurred in Q2 2020, with a gross profit margin of 44%, of which Guoju officially merged with Ki-Mei in April 2020.
Recently, the gross profit margin of Guoju has been lower than 40%, and 's gross profit margin in the past 12 months has been 39.62%, which is very close to the 40% target mentioned by Boss Chen last year. The gross profit margin of passive components leader Murata in the past 12 months was 41.54%.
Cash flow - reflects the enterprise's ability to realize its value
Cash flow statement mainly includes operating cash flow, investment cash flow, financing cash flow, free cash flow and net cash flow . (the unit in the figure is NT$1,000)
In addition to the strong operating cash flow in the three quarters of 2018, Guoju's quarterly operating cash flow has been greatly improved in the past two years. Its quarterly operating cash flow scale from 2021 to 2022 basically exceeded NT$5 billion, and its hematopoietic ability has been enhanced. In the past third quarter, its operating cash flow exceeded NT$10 billion.
This year is another year of great harvest in China.But Guoju is still expanding heavily. In the second and third quarters of this year, the negative value of its investment cash flow reached more than NT$12 billion and more than NT$8 billion respectively, which is quite radical. In October this year, Guoju announced the acquisition of two sensor divisions by as much as US$747.26 million, or approximately NT$23.2 billion.
Source: HiStock
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Ending Relationship
After the inclusion of the US and China, China's giant accelerated its transformation. The purpose of Guoju's merger and acquisition case in October is quality rather than quantity, but has its ambitions and long-term plans.
Although the annual revenue of the Heraeus temperature sensor business department in Germany only accounts for about 2% of Guoju's total revenue this year, the two sensor mergers and acquisitions of Kimei and this year will contribute NT$13 billion in revenue to Guoju every year. When the transaction is officially completed before the first half of next year, it is expected that Guoju will see higher revenue and gross profit margins from the second half of next year.
The bottoming of the industry inventory adjustment has also brought good news to Guoju. Although the fourth quarter of this year entered the traditional off-season for passive components, brokerage estimates that the inventory adjustment of passive components is expected to bottom out this season. Therefore, operations in the fourth quarter and next year's first quarter of next year are expected to squat first and then jump, and will challenge the restart of growth in the first quarter of 2023.
Boss Chen believes that when companies in Greater China are grabbing the flour under the cake, the cream on it is actually the key to qualitative change. What kind of surprises will Guojiu, which is no longer confined to the label of passive component manufacturers, bring us?
