(Report Producer/Author: Huabao Securities, Hu Hongyu)
1. Fuse: an indispensable safety barrier under the high-pressure penetration of new energy and electric vehicles
1.1. An important barrier to circuit protection
Circuit safety is usually done by a circuit control device and a circuit protection device. Circuit control devices mainly include mechanical switches and electronic switches, which are switched and controlled to keep the circuit on or off. Circuit protection devices are mainly divided into three categories: overcurrent, overvoltage, and overtemperature protection. Circuit protection device refers to a type of device installed in the circuit, when the circuit appears overcurrent, overvoltage or overheating, etc., automatically triggers the fuse, resistance mutation or other physical changes in the relevant functional parts, thereby cutting off the circuit or suppressing the sudden change of current and voltage, and playing a role in protecting the circuit and electrical equipment. Among them, the fuse is an overcurrent protection device.
A fuse is a device that protects a circuit from overcurrent. During operation, the fuse is connected in series in the circuit, and the load current flows through the fuse. When the circuit is short-circuited or overloaded, the thermal effect of the overcurrent causes the melt to melt and vaporize to produce a break, the fracture produces an arc, and the fuse cuts off the fault circuit by extinguishing the arc, which plays a role in circuit protection. The fuse is mainly composed of a melt, an arc extinguishing medium, an M-effect point, an insulated tube shell, contact terminals and an indicator.
When the fault current is large, the fuse can provide short circuit protection more effectively by virtue of its strong breaking ability, fast speed and large current. In general, the fault current is protected by the switching device when the fault current is small, and the fuse is protected by the fuse when the fault current is large. The short-circuit current amplitude is large, and it is necessary to protect the device with large breaking ability, strong current limiting ability and fast breaking speed, among which the high breaking capacity current limiting fuse is the most effective and widely used large-value short-circuit current protection device due to its excellent high breaking ability and limiting fault current energy performance. Fuse can provide the most effective large value short circuit current protection, with the increase of the overcurrent amplitude, the operation time is greatly reduced, can be as low as 1ms or less, the current limiting ability is obvious, the energy value through is almost constant, can effectively protect the safety of the circuit system; the switching protection device operation time has a lower limit, generally difficult to be as low as 10ms or less, with the increase of the overcurrent amplitude, the fault energy value of the pass is increased exponentially, the safety and reliability of the self is greatly reduced, and the safety of the circuit is significantly reduced.
1.2. Classification of fuses
According to the power strength and application scenarios, fuses can be divided into electronic fuses and power fuses. Electronic fuses are generally suitable for low voltage, small power and electronic control and other circuits, mainly used in various types of electronic products, household appliances, vehicle low-voltage circuits and other fields, power fuses are generally suitable for high voltage, high-power circuits, mainly used in traditional power generation, power transmission and distribution, metallurgy, mining, electrochemical, communications, new energy wind and solar power generation and energy storage, new energy vehicles, rail transit, shipbuilding and other industrial fields. In addition, with the emergence of the high-voltage trend of new energy vehicles, the requirements for current protection are gradually improved, and the penetration rate of the excitation fuse that can actively cut off the current and the reaction time is slowly improved, which is currently being used in some models; and Tesla began to develop pyrofuse (intelligent fuse) in 2020, Pyrofuse realized from passive fuse protection to active BMS protection, and the response speed is expected to be reduced to 1-3ms, which has gradually begun to be applied. (Source: Future Think Tank)
2. The vision of double carbon boosts the new energy market, and the small and beautiful industry is expected to grow at a high speed
2.1. The growth rate of traditional business is slow, and the market has entered a bottleneck period
The growth rate of home appliances has slowed down, and the growth rate of the fuse market has entered a bottleneck period. Fuses are one of the most widely used devices in circuit protection devices, with the global circuit protection device market size of $6.98 billion in 2019, of which the sales amount of overvoltage protection devices was $3.57 billion, accounting for 51.2%, and the sales amount of fuses was $2.204 billion, accounting for 31.6%. From 2008 to 2019, the global fuse market size and sales volume have declined to a certain extent, and the decline in traditional white electricity and consumption may be the main reason, but we believe that with the rapid growth of new markets such as new energy power generation, electric vehicles, smart grids, energy storage and other new markets to promote power reform, the fuse market is expected to undergo structural changes. With the rapid development of emerging industries such as new energy vehicles, new energy power generation, 5G communications, rail transit, and digital technology, higher requirements will be put forward for fuse performance, reliability, and intelligence under the trend of high voltage platforming, which will become a new driving force to promote the development of the fuse industry.
The global fuse market continues to shift to the Asia-Pacific region, and the domestic market is expected to grasp the growth momentum of home appliances to new energy transformation. As Asia becomes the main sales market of the fuse industry, Eaton, Mersen, Littelfuse and other leading international manufacturers of circuit protection devices have set up production bases in China, India and other countries, shifting the focus of production to Asia. Previously, China led the important production bases of home appliances and consumer electronics to promote the overseas leaders of fuses to accelerate the establishment of domestic production lines, and the new generation of fuses to transform the demand will be new energy power generation, electric vehicles as the main driving force, China is expected to rely on its industrial chain advantage in the field of new energy industry chain to accelerate the rapid growth of the fuse market.
2.2. The value of new energy vehicles and bicycles increases, and fuses are expected to enjoy the dual opportunities of technological change and market volume
The trend of high-voltage platforms for new energy vehicles has spawned new demand for power safety fuses. Automotive fuses are divided into low voltage and high voltage two parts, automotive low voltage fuses application voltage is generally lower than 60VDC, mainly electronic fuses to protect the low voltage load of the car, such as lights, window motors, wipers motors, horns and other such protection in traditional vehicles and new energy vehicles have been applied. High-voltage protection is mainly applicable to new energy vehicles, the application voltage is generally 60VDC-1500VDC, mainly power fuses (new energy vehicle high-voltage fuses) to protect the main circuit and auxiliary circuit. As the new energy vehicle market enters the post-subsidy era, personal consumption demand promotes the high-voltage platformization of new energy vehicles, and the safety requirements in high-voltage fields such as fast charging, motors, and power devices cannot be ignored, and the rapid breaking ability of fuses in stability and overcurrent reaction will maintain the rapid increase in demand under the rapid growth of new energy vehicles.
Fuses are expected to enjoy the rapid development trend of rising volume and price in the growth dividend of new energy vehicles:
Volume: The three major economies of China, the United States and Europe continue to exert efforts, and the global demand for accelerated electric vehicles is expected to enter the era of tens of millions. Entering 2022, although the domestic new energy vehicle subsidy continues to decline, but the gradual emergence of personal demand continues to promote the growth of new energy vehicle sales, we believe that urban transportation demand (A0) + personal two sets of car supplement (A + B level) will become the main growth driver of the mainland; in addition, The European and American carbon emission policies continue to exert force, we expect that in the three major auto markets resonance demand upwards, global new energy vehicle sales will reach 19.47 million by 2025.
Price: Compared with traditional cars, high voltage overcurrent protection has led to a 10-fold increase in the value of bicycles. The voltage of the corresponding electronic components in the traditional automotive field is lower than 60VDC, which mainly protects the low-voltage load of the vehicle, such as lamps, window motors, wipers motors, horns, etc., usually using 5-6 low-voltage protection components, and the value of the bicycle is only 15-20 yuan; and the new energy vehicle In addition to the low-voltage protection, the application voltage of the high-voltage electronic devices is generally 60VDC-1,000VDC, which is divided into main loops and auxiliary loops. Main circuit protection refers to the overcurrent protection of the battery's high-current charge and discharge, vehicle drive circuit. Auxiliary circuit protection refers to the protection of the auxiliary function circuit of the vehicle, such as air conditioning, DC/DC (direct flow DC power supply), PTC (heating), air pump, etc., OBC (slow charging), etc. The bicycle value of new energy passenger vehicles is estimated to be 218 yuan, and the bicycle value of new energy commercial vehicles is usually 700-900 yuan, which is more than 10 times the value growth of the traditional car market.
Technological change gives rise to value enhancement: incentive fuses are gradually penetrating in new energy vehicles. With the upgrade of the voltage platform to 800V, the supporting fuse circuit protection requirements have also been upgraded accordingly, and a new type of excitation fuse has come into being, and the new excitation fuse has been gradually applied to new energy vehicles by receiving control signals. The excitation fuse can actively cut off the high voltage circuit, quickly disconnect the system power supply, isolate the high voltage end to ensure the safety of the vehicle system and personal safety, compared with the traditional fuse, its operating time is shortened, the power consumption is reduced, and the hidden danger of shell conduction under the high voltage scenario can be effectively solved, and has begun to be applied to new energy vehicles. With the continuous upgrading and improvement of technology, the market share of incentive fuses is expected to continue to expand, according to the prospectus of Zhongfu Electric, the average price of the company's incentive fuses in 2020 is 88.9 yuan / piece, and it is expected that the new incentive fuses can increase the value of bicycles by 20%.
Tesla leads the new trend of intelligent fuse research and development, and the safety of electric vehicles is guaranteed in the process of intelligentization. In 2020, Tesla changed the traditional passive fuse and developed its own active intelligent fuse Pyrofuse for its Model 3, the main role of Pyrofuse is the switching effect, when a collision, short circuit or other safety failure occurs, Pyrofuse can cut off the power supply in a very short period of time, reducing the probability of danger. Unlike traditional fuses, Pyrofuse has changed from passive fuse protection to active BMS protection, reducing the response speed to 1-3ms. At present, in addition to Tesla to achieve support, Volkswagen, Geely, Huawei and other companies in the field of new energy vehicles and fast charging have begun to lay out the corresponding technology, we believe that with the high-pressure trend of the safety requirements for new energy vehicles more improved, active fuse or will be the main development trend in the future.
The global fuse market size in the field of new energy vehicles is expected to reach 6 billion yuan in 2025. Without considering the penetration rate of Pyrofuse, we assume that the penetration rate of incentive fuses in new energy vehicles will be 5% in 2021, combined with the decline in the historical price of fuses, we predict that the fuse market size in the domestic and global new energy vehicle field will reach 24/6 billion yuan in 2025, and the domestic and global fuse market size in the new energy vehicle field will reach 3.7/95 billion yuan by 2030, and the CAGR will reach 20%, and the market will continue to grow at a high speed.
2.3. Under the vision of double carbon, the installed capacity of new energy continues to increase, and the fuse market is expected to increase rapidly
Photovoltaic Market:
The supply and demand of the industrial chain are back to balance, and the market for large bases is expected to continue to grow at a high speed. Driven by the global vision of double carbon, the demand potential of photovoltaic terminal installed capacity is abundant, and with the gradual production of silicon materials and silicon wafers, in the case of the upstream of the industrial chain into the game and price reduction channel, the supply and demand game between the photovoltaic manufacturing industry chain and the power station end is expected to ease, with the decline in component prices to bring the IRR income of terminal power stations back to normal, the demand potential is expected to be further released. In addition, during the 14th Five-Year Plan period, the first batch of wind and solar bases began to start construction in an orderly manner, and the second batch of wind and photovoltaic bases began to declare, and it is expected that the gradual grid connection in 23 years will improve the overall installed level. We expect that in 2022-2023, the global installed photovoltaic demand will be about 210GW and 240GW, respectively, with a year-on-year growth rate of about 24% and 41%, respectively, of which domestic demand will be 78GW and 82GW, respectively, with a year-on-year growth rate of 50% and 5%, respectively. Considering the capacity ratio of modules, the global installed capacity demand corresponds to the demand for photovoltaic modules of about 252GW and 288GW respectively, although the demand is still in a state of oversupply compared to the supply, but considering the production capacity of some lecturers and the elimination of backward production capacity, we are more optimistic about the profitability of integrated leading module manufacturers and power plant companies with customer advantages.
Wind power market:
The continuous improvement of the domestic double-carbon "1+ N" policy system is expected to support the medium- and long-term growth expectations of new energy. We expect that the double carbon target implies an average annual installed capacity requirement of 45 and 60GW for wind power in the "14th Five-Year Plan" and "15th Five-Year Plan", which is expected to further exceed expectations under the impetus of supporting policies. At the same time, the construction of the first phase of the first phase of about 100GW wind and photovoltaic base project has now begun, and the second phase of the wind and photovoltaic base will also be declared in December, and we believe that the large base project is expected to become the main force of wind power installed capacity growth during the "14th Five-Year Plan" period, and the growth potential is huge.
Q3 Wind turbine tenders exceed expectations, and offshore wind power is expected to open a new stage of growth. According to the data, the 2021Q1-3 domestic wind power bidding scale reached 41.9GW, exceeding market expectations, we believe that the annual tender volume is expected to reach about 55GW, in the case of land wind subsidies completely retreat sea breeze last year subsidies, 2022 demand is expected to return to high prosperity. We expect that in 2021/22, the domestic wind power installed capacity is expected to reach about 38/50GW, onshore wind power is expected to usher in the recovery of demand in the post-subsidy era, and the offshore trend is obvious with the obvious trend of bidding price parity, and the installed capacity of affordable wind power projects is expected to exceed expectations. At the same time, under the dual-carbon vision of the superimposed wind and solar base project, we expect that the actual average annual installed capacity of the "14th Five-Year Plan" is expected to reach 55GW (of which offshore wind power is expected to exceed 10GW per year), which will exceed the target of 50GW/60GW of new wind power installed capacity in 2021-2025 and 2026-2030 in the Beijing Declaration on Wind Energy, corresponding to CAGR or 15%, and the installed growth and stability will be significantly strengthened.
Energy Storage Market:
We expect that the global energy storage time will usher in a rapid expansion phase in the next five years, with the global installed capacity demand for energy storage being 290.1GWh in 2025, and the cumulative increase in the next five years is 732GW, with a five-year compound growth rate of 56.2%. The main growth driver comes from the rapid growth of the power generation side, with a compound growth rate of 79.4% and 85.6% in the five years, respectively.
The instability of new energy power generation has promoted the rapid growth of power-side fuses. The direct output current of new energy wind and photovoltaic power generation does not match the transmission grid, if the power is transmitted through the grid connection (AC high voltage network), the current needs to be transmitted to the grid through the inverter converter to alternating current. New energy wind and photovoltaic power generation power fluctuations, the need to configure the energy storage system to achieve peak-valley power balance, of which photovoltaic power generation due to the small single-cell power, generally through the confluence system to increase the power generation. All power generation systems, converter systems, and energy storage systems need to be coordinated by the control system.
According to the single fuse and price required in the prospectus of Zhongfeng Electric, the fuse required for a single GW 1500v photovoltaic system is about 4.8 million yuan, the 1000v photovoltaic system is about 4.75 million yuan, the fuse required for a single GW wind power is about 2.86 million yuan, and the fuse required for a single GW energy storage system is about 12 million yuan.
Photovoltaic field: The voltages currently used are mainly 1,500VDC and 1,000VDC. In the 1,500VDC photovoltaic system, for every 1MW installed, about 150-180 sets of fuses on the busting side, each set of about 20 yuan per unit price; the inverter side uses about 4-8 high-current fuses, each with a unit price of about 250 yuan, according to which the amount of fuses used per 1MW installed is about 4,000-5,600 yuan. In the 1,000VDC photovoltaic system, for every 1MW installed, about 320-400 sets of fuses are used on the combined side, and the unit price of each set is about 10-12 yuan; the inverter side uses about 8-12 high-current fuses, each with a unit price of about 150 yuan, but some inverter side protection schemes in the 1,000VDC photovoltaic system use circuit breakers instead of fuses, according to which the amount of fuses used per 1MW installed is about 3,800-5,700 yuan.
Wind power field: every 1.5-2MW installed, about 6 AC output fuses, auxiliary transformers 3-6 fuses, lightning protection fuses 3-6, measuring circuits with fuses 3-6, control loops with 4-6 fuses, some systems also use DC fuses 2-4, according to which the amount of fuses used per 1.5-2MW installed is about 4,000-6,000 yuan.
Energy storage: Approximately 6,000-10,000 main fuses and approximately 30,000-5,000 internal fuses per 1GW of energy storage systems, according to which it is estimated that the amount of fuses used per 1GW of installed capacity is approximately $10 million to 14 million.
The vision of double carbon boosts the rapid growth of new energy power generation installed capacity, the construction of new power system energy storage is lagging behind, and the new energy application of power fuse is expected to grow exponentially. We believe that compared with new energy vehicles, the potential growth rate of current protection demand in the field of new energy generation will be greater, on the road of carbon neutral transformation, under the support of subsidies and policies, we will first rapidly expand the installed capacity of new energy power generation, but as new energy gradually becomes dominant, its instability and discontinuity will seriously affect the safety of electricity, so flexible regulation of power resources will be an important guarantee for the construction of a new power system, due to the low base of electrochemical energy storage at this stage, Therefore, energy storage is expected to catch up later and will promote the continued exponential growth of power fuses. We estimate that by 2025, the domestic new energy power generation fuse market size will reach 1.7 billion yuan, and the global market is expected to reach 5.3 billion yuan.
2.4. Structural changes in the market have helped the industry to become a small and beautiful segment of new energy
According to estimates, fuses in the field of new energy (electric vehicles + power generation) account for about 13% in 2019, and the dual carbon vision will promote structural changes in the industry market. According to estimates, the size of China's fuse market in 2019 is about 5.06 billion yuan, combined with the sales volume of new energy vehicles and new energy installed capacity in mainland China in 2019, it is estimated that the fuse market size in the new energy field in 2019 is about 630 million yuan, accounting for about 12.5% of the overall market. However, with the new energy vehicles into the era of personal consumption, the vision of double carbon to promote the rapid improvement of wind and solar installation, the demand for circuit protection in the new energy field will maintain rapid growth, compared with the traditional home appliances, rail transit and other fields The growth rate is low, the rapid growth of the new energy field will boost the structural change of the fuse terminal market, and the fuse is expected to become a small and beautiful subdivision track in the new energy industry.
We predict that the fuse market size is expected to reach 9.44 billion yuan in 2025, of which the proportion of new energy will reach 44.2%. Combined with the previous assumptions, we predict that the fuse market size is expected to reach 9.44 billion yuan in 2025, of which the proportion of new energy will reach 44.2%, compared with 5.06 billion yuan and 12.5% in 2019. (Source: Future Think Tank)
3. Market pattern: International brands are still dominant, and domestic companies are expected to grasp the first-mover advantage to deepen the market segment
3.1. 90% of the market share of fuses is dominated by international manufacturers
The fuse industry market is relatively mature, the current global major players are Littelfuse, Bussmann, Mersen, PEC, SCHURTER and other foreign manufacturers, domestic fuse manufacturers generally operate on a small scale, only Holly Technology, Zhongrong Electric and Shanghai Electrical Ceramics Factory market revenue can exceed 100 million yuan. According to Paumanok Publications Inc., as of 2019, littelfuse, Bussmann, Mersen and other overseas first-tier brands collectively accounted for about 90% of the global market share, according to 2019.
From the perspective of terminal market structure, the global fuse terminal application in 2019 is distributed in four major fields: electronic devices, industry, automotive and residential. Among them, the application areas of electronic devices include various types of consumer electronics, household appliances, etc., with a market share of 35%, which was the main downstream demand at that time, and the industrial application areas included traditional industry, communications, electric vehicles, new energy wind and solar power generation and energy storage, etc. In 2019, this part accounted for 31%, we believe that with the continuous improvement of demand in the field of new energy, the proportion of this part will gradually surpass the electronic field to become the largest downstream market for fuses.
3.2. Customer stability + long certification cycle, domestic leading enterprises are expected to enjoy the rapid growth dividend of the market by virtue of domestic substitution + first-mover advantage
As an important component of circuit safety, the fuse is an important barrier for new players to enter the customer stability + long authentication cycle. As one of the most widely used devices in circuit protection devices, fuses are directly related to the performance, quality and reliability of products that are directly related to power safety customers. Fuse industry downstream high-end market end users are mostly well-known manufacturers in various industries, these manufacturers have established a strict supplier screening system, generally from the initial contact to establish a stable cooperative relationship for up to 2-5 years, during which will focus on the evaluation of suppliers R & D capabilities, production processes, product quality, quality management, production capacity and other aspects of the strength, only to meet the customer's all-round requirements, the two sides will establish a stable cooperative relationship. In addition, some areas (new energy vehicles, communications, high-voltage power, etc.) have higher requirements for fuses, enterprises need to complete the quality management system certification, the certification process puts forward higher requirements for product design, raw material selection, production process and other links, from the submission of certification applications, sample testing to the final certification certificate, long time period, high cost, difficulty. Therefore, domestic manufacturers that have already entered the supply chain of downstream leading enterprises and have formed a stable supply are expected to take the lead in enjoying the dividends of rapid growth in the industry by virtue of their first-mover advantage.
Domestic manufacturers are expected to form a breakthrough by virtue of their advantages in subdivision fields. Among the domestic manufacturers, only Zhongrong Electric, Holly Technology, Shanghai Electric Ceramics Factory three enterprises of the fuse revenue of more than 100 million yuan, of which Zhongrong Electric deeply ploughed the new energy vehicles and new energy power generation in the field of fuse, has entered the Ningde era, Sunshine Power, Tesla and other downstream well-known enterprise supply chain, although the shipment and revenue is low, but with the further release of new energy vehicles and the integration of wind and solar storage continues to advance, the company is expected to further enhance its market share in the corresponding market segments. Hollywood Technology as a fuse market leader, its market share in the field of traditional consumer electronics and home appliances is high, - the company to consolidate its leading position while gradually transforming the power field, has gradually begun the supply of sunshine power, Hewang Electric, Huichuan technology and other downstream customers, is expected to rely on its traditional market advantages to complete the transformation. Shanghai Electric Ceramics Factory as a wholly-owned subsidiary of Shanghai Electric, its products are mainly for electric power, rail transit, military and other fields of high-voltage fuses, the company is expected to use the advantages of the group in the field of high-voltage segmentation to continue to promote localization, is currently the first in the country to launch oil-immersed full range of protection of high-voltage fuses and fill the international gap with high-voltage fuses for wind power launched, thus becoming a leading American high-voltage fuse technology enterprises.
4. Domestic listed companies
4.1. Holly Technology: After 30 years of deep ploughing of fuses, the transformation of the power sector has set sail again1
1) Leading company focusing on circuit protection for 30 years
Holly Technology was established in 1992, after 30 years of continuous exploration and development, the integration of advanced technology at home and abroad, the company has developed a series of cost-effective, complete product line of fuses, product system including 213 series, more than 6000 specifications and models, has become the largest circuit protection components manufacturer in mainland China, the leading enterprise in the mainland circuit protection components industry, the world's leading fuse manufacturer. The company has formed a combination of direct sales, professional distributors, small and medium-sized traders sales model, products cover tubular fuses, radial lead fuses, SMD fuses, power fuses and self-resetting fuses five categories of products, mainly used in various types of household appliances, home audio-visual and digital products and other consumer electronic products, computers and their peripherals, smart phones and their peripherals, lighting, medical electronics, automotive electronics, electricity, industrial equipment and other products, a wide range of applications. The company's main customers are mostly international brand enterprises in the industry, after years of accumulation, the company has established long-term and stable cooperative relations with many well-known downstream customers at home and abroad.
As a traditional electronic fuse leading enterprise, Holly Technology has an absolute dominant position in the field of traditional electronic fuses, with strong technical accumulation and excellent product quality, the company has become the mainstream manufacturers in the field of home appliances Midea, Gree, TCL, Hisense, Oaks and other most important suppliers of protective circuit components. At the same time, the company has become a major supplier of high-end products such as Haier's acquisition of GE home appliances through the development of higher-end products.
While consolidating the traditional advantages of the field, Holly Technology through independent research and development and cooperative development, in the raw materials, production process and product innovation continues to explore, developed a number of production process technology with independent intellectual property rights and circuit protection components of the subdivision products, new products better and faster to meet the changing market demand. With the comparative advantages in terms of labor costs and product cost performance, Holly Technology has begun to encroach on the traditional advantages of the first echelon of foreign-funded enterprises in many fields.
With the entry of new shareholders in 2021, the company bid farewell to the multi-year performance wandering stage and began to grow rapidly.
Hollywood Technology has carried out a series of reform measures after the new shareholders took ownership, the company's performance achieved the largest growth since the listing in 2021, the first three quarters of revenue and attributable net profit achieved 44% and 38% growth, and on January 25 this year, the company released a performance forecast showing that the company's net profit attributable to the mother in 2021 increased by as much as 104%-150%, reaching a new high in 6 years.
At the same time, years of steady operation have made the company the company with the lowest debt ratio of listed companies in the passive electronic components sector, and has accumulated a large financial safety cushion and financial leverage potential for the company to expand new business in the future.
From the perspective of gross profit margin, Holly Technology is higher among passive electronic component listed companies, but the net profit margin is low, and the company's return on net assets and total assets are in a low position.
From the perspective of debt repayment indicators, the debt ratio of Holly Technology is only 13%, which is the lowest debt ratio among all passive electronic component listed companies, and corresponding to this, its debt repayment index current ratio and quick ratio are almost the highest in the sector, showing the adequacy of the company's cash flow, indicating that the company has a large financial leverage potential when vigorously expanding the market in new areas in the future.
2) New shareholders enter the ownership to open a high-growth model
In May 2021, the actual controller of the company was changed from Ms. Huang Shuting and Ms. Zheng Qianling to Mr. Tang Qiqing, and in June of the same year, the company introduced a new management team and began a series of strategic upgrading measures of the company. The management team proposed a new "XYZ Strategic Plan" by introducing Huawei's excellent strategic planning methodology BLM. The first is to consolidate the main business, increase the investment in power products, adhere to the quality at the same time, and constantly pursue the reduction of product costs to further enhance the competitiveness of products; the second is to expand new products and categories around circuit protection, provide customers with complete solutions for circuit protection, and explore new business models; the third is to find a new second curve through investment in new industries, laying the foundation for the company's rapid development.
Another opportunity brought by the new shareholders to enter the field of emerging industries such as semiconductor chips through the establishment of participating industry funds.
On September 2, 2021, the Company signed a Letter of Intent for Cooperation with Dai Bin, Beijing Jinyuan Technology Co., Ltd. and Qusuo Technology, proposing to hold 3.125% of the equity of Qusu Technology, and subsequently have the right to require Dai Bin and Beijing Jinyuan Technology Co., Ltd. to transfer all or part of the equity held by the Company to the Company to ensure that the equity ratio of Qusu Technology held by the Company is not less than 51%. The main business of the proposed capital increase target Isako Speed Technology is the research and development, design and sales of intelligent computing video chips and GPUs, and R&D centers have been established in Beijing, Shanghai, Hangzhou and Silicon Valley, and the backbone members have rich experience in chip design and development, artificial intelligence research and application experience, video processing acceleration experience, and have been engaged in research and development in related fields for a long time.
In December 2021, the company announced that its wholly-owned subsidiary, Hangzhou Good Profit Hui Private Equity Fund Management Co., Ltd., together with Hangzhou Chenghe Venture Capital Co., Ltd., Hefei Industrial Investment Guidance Fund Co., Ltd. and Hefei Xincheng State-owned Assets Management Co., Ltd., jointly invested in the establishment of a private equity investment fund- Hefei Core Silicon Equity Investment Partnership (Limited Partnership, which has a scale of RMB 802 million and is specifically used to invest in Shanghai Super Silicon Semiconductor Co., Ltd. Among them, Good Profits is the general partner, and the subscribed capital is 1 million yuan; Chenghe Venture Capital is the general partner, with a subscribed capital contribution of RMB1 million, and also serves as the executive partner of the partnership; Hefei Industrial Investment Guidance Fund Co., Ltd. is a limited partner, with a subscribed capital of RMB600 million; Hefei Xincheng State-owned Assets Operation Co., Ltd. is a limited partner and subscribes to contribute RMB200 million. According to the Company's announcement in February 2022, Hao Profit Hui and Chenghe Venture Capital signed an Investment Advisory Agreement on the investment and operation of the above-mentioned partnership, and Chenghe Venture Capital entrusted Hao Profit Hui as its investment adviser and paid the consultant fee. The consultancy fee is 70% of the partnership fee (including management fee and performance share, etc.) charged by Chenghe Venture Capital. In addition to the generous management fees for the company, this investment is also expected to bring high investment returns to the company in the future.
3) New strategies open up room for growth
Because the fuse industry is a relatively small industry, in order to expand the market size the company faces, the company has begun a strategic transformation in recent years, that is, from a single fuse product manufacturer to a circuit protection solution provider. This transformation opportunity comes from the intelligence of traditional home appliances, more and more home appliances began to have intelligent functions, including high-end kitchen appliances, sweeping robots, smart TVs, smart refrigerators, etc., smart home appliances need more sensing equipment and control equipment, bringing the incremental demand for MCUs and sensors and other products, the company seized the customer's demand for system integration and reduced procurement costs and began to do the entire circuit protection solution, to provide customers with a complete set of product service packages.
The service of the complete circuit protection solution can increase customer dependence and stickiness, broaden the moat of the company's competition, and enhance the profit margin. At the same time, it provides opportunities for the subsequent integration of MCU control equipment, sensing equipment, and IGBT power equipment around the fuse through investment and cooperation.
4) The layout of new energy brings new growth opportunities
Holly Technology is a domestically recognized electronic fuse leader, but in fact, Holly Technology has been involved in the research and development of new energy vehicle fuses as early as 2010, and obtained ISO/TS16949 certification in 2011, from battery packs, vehicles to charging piles, Holly Technology's fuse products have in fact covered the entire industry chain of new energy vehicles. At present, some fully mature products have been supplied to charging pile enterprises, and some automotive products have also been loaded on a small scale. At present, the company is actively preparing to cut into the new energy automobile industry from the perspective of technological innovation, and is expected to become a rising star in the fuse of the new energy automobile industry.
With 30 years of experience in circuit protector design and manufacturing, Holly Technology has carried out a large number of leading research on the protection of electronic power systems in the field of new energy, especially the protection research of solar photovoltaic power generation system wires, solar panels and related devices and equipment, specialized in the development of high-performance solar photovoltaic system fuse series, and passed the CCC, CGC, UL, TUV, VDE and other safety certifications, widely used in photovoltaic power generation system combiner box, DC regulator, inverter and grid-connected interface. At present, the company has cut into the field of photovoltaics, and now began to enter the energy storage market, and has established close strategic cooperation with mainstream enterprises such as Sungrow Power, TBEA, and Deye Shares.
On the one hand, the company has continuously deepened cooperation with leading customers in the photovoltaic and energy storage industries such as Sungrow Power And Hewang Electric, and on the other hand, it has rapidly promoted the establishment of cooperation with benchmarking enterprises in the EV industry such as Ningde Times and BYD. Based on the forward-looking layout in the early stage, the company's business transformation has begun to show results, as of February 28, 2022, the company's orders in the power sector amounted to 18.44 million yuan, an increase of nearly 7 times year-on-year.
Thanks to a series of measures after the new shareholders took ownership, the company's performance achieved the largest growth since the listing in 2021, achieving revenue and attributable net profit of 44% and 38% in the first three quarters, and the performance forecast released by the company on January 25 this year showed that the company's net profit attributable to the mother for the whole year of 2021 increased by as much as 104%-150%, creating a new high in 6 years.
4.2. Zhongfu Electric: Focus on the field of new energy vehicles, and the power fuse leader will catch up later
1) Leading enterprise of new energy vehicle power fuse
The predecessor of the company, Zhongrong Co., Ltd., was established in 2007 and later changed to Xi'an Zhongrong Electric Co., Ltd. in 2016. The company's main business is the research and development, production and sales of fuses and related accessories, the main products are power fuses, electronic fuses, incentive fuses, of which the leading products are power fuses. The company has a rich product series, with nearly 60 product series and more than 6,000 kinds of product specifications, mainly used in new energy vehicles, new energy wind and solar power generation and energy storage, communications, rail transit and other high-end market areas in the new energy vehicle market. The company's leading products are power fuses, and the corresponding revenue in 2020 will account for 96.2%. At present, the main downstream application areas of the company's products are new energy vehicles, new energy wind and solar power generation and energy storage, communications, rail transit and other emerging markets. The company's fuse products are mainly through the Cataline Era, Guoxuan Hi-Tech, Pride, BYD supply chain, Jabil Electronics, Huichuan Technology and other mainstream power batteries, electronic control systems and their supporting manufacturers into the new energy vehicle supply chain, the main end users are Tesla, Daimler, BYD Automobile, SAIC Passenger Vehicles and other mainstream new energy vehicle manufacturers at home and abroad, while the company and SAIC Volkswagen has launched preliminary cooperation. In 2021Q3, the company's operating income reached 266 million yuan, and the net profit after deduction of non-attributable to the mother reached 0.49 billion yuan, an increase of 78/57% year-on-year.
From the perspective of gross profit margin, Zhongrong Electric is slightly better than Holly Technology in the sector and is in a higher position in the sector, but the net interest rate, the return on net assets and the return on total assets are in the lower middle position in the sector, showing that although the new energy automobile industry has good growth, there is also greater price pressure.
Because Zhongrong Electric has just been listed, the asset-liability ratio is also low (23%), but it is still significantly higher than Holly Technology, and the current ratio and quick ratio of solvency indicators are close to Holly Technology, which is in the top three in the sector. Accounts receivable turnover and inventory turnover are in the middle of the segment.
2) The advantages of technological innovation are obvious
The company's management team has more personnel from Xi'an Fuse Manufacturing Company and Kubai Xi'an Fuse Co., Ltd., most of whom have 20 or 30 years of experience in fuses, calm management style, and rich industry experience. The company attaches great importance to technology research and development and independent innovation ability to improve, in 2010 was identified as "high-tech enterprises". At present, the company and its subsidiaries have a total of 103 national patents, including 2 invention patents, 97 utility model patents, 4 design patents, and a number of invention patent office application process. The company has won the "Technology Innovation Fund for Technology-based Small and Medium-sized Enterprises" awarded by the Ministry of Science and Technology, the "Top Ten Innovative Enterprise Award" of China's energy-saving and new energy automobile industry in 2017, the "Best Supplier" of China's Renewable Energy Generation System Industry in 2018, the "Famous Trademark of Shaanxi Province", "Famous Trademark of Xi'an City", and the "Top 20 of Xi'an Gantry List" in 2020. At the same time, the company has also won the "Technological Innovation Award" of THE NINGDE Era, the "Best R&D Support Award" of Emerson, and the "Technical Service Award" of Hewang Electric.
The company is now a member of the National Fuse Standardization Technical Committee, a vice chairman unit of the low-voltage fuse branch, and a member unit of the small fuse branch, and has participated in the drafting of a number of national and industry standards. The company has established a strict quality control system, has passed the IATF16949 automotive industry quality management system certification, ISO/TS22163 rail transit industry quality management system certification, ISO9001 quality management system certification, ISO14001 environmental management system certification, OHSAS18001 occupational health and safety management system certification. The company's products have obtained the mainland compulsory certification product conformity self-declaration evaluation, as well as the United States UL, Germany T V, international CB, THE EU CE certification, in line with the EU RoHS directive, REACH regulations, is currently one of the most complete domestic power fuse field quality system and product safety certification.
3) The high prosperity of new energy vehicles has led to the rapid growth of the company's performance
According to the company's plan, the company will accelerate its entry into the parts supply chain of international first-class vehicle manufacturers such as Volkswagen, Daimler, BMW, Toyota and other international first-class vehicle manufacturers in the future, and strive to become a world-renowned fuse brand manufacturer with international competitiveness in the new energy vehicle market in 3-5 years. Global new energy vehicle sales are expected to reach 18.43 million units in 2025, an increase of about 7 times from 2.29 million units in 2019, with an average annual compound growth rate of 40.6%. In December 2019, the Ministry of Industry and Information Technology issued the "New Energy Vehicle Industry Development Plan (2021-2035)" for comment, clarifying that by 2025, the sales volume of new energy vehicles in mainland China will account for about 25%, assuming that the annual sales volume of mainland automobiles in the future will maintain the current scale, that is, the annual sales scale of mainland automobiles in 2025 will be about 25 million, calculated based on the penetration rate of new energy vehicles, and the sales scale of new energy vehicles in mainland China will be about 6.25 million in 2025, with an average annual compound growth rate of more than 30%.
In addition, the company has begun to enter the new energy wind and solar power generation and energy storage power fuse market field in recent years, which the photovoltaic and energy storage industry will also show a rapid growth trend in the future, according to the expectations of the photovoltaic industry association, the "Fourteenth Five-Year Plan" period of the mainland photovoltaic annual average installed capacity of 70GW-90GW, 2025 new installed capacity or reached about 120GW; it is expected that the global average annual installed capacity of 2021-2025 will reach 222GW-287GW, 2025 The global new installed capacity of photovoltaics is expected to reach 400GW this year, an increase of 250% over 2019.
With the first-mover advantage in the field of new energy vehicles, the company's performance has shown a rapid growth momentum with the high prosperity of the new energy automobile industry. In the first three quarters of 2021, the company's operating income and net profit attributable to the parent company increased by 78% and 43% respectively year-on-year.
5. Investment Analysis
The new energy field will become the main driving force of the incremental market of fuses, focusing on leading domestic manufacturers with first-mover advantages and domestic substitution in the segment. We believe that fuses as a small and beautiful market segment under the rapid development of new energy is expected to continue to grow rapidly, and the domestic market share is expected to reach 9.5 billion yuan in 2025, CAGR is 12%, and the market share in the new energy field is expected to increase from 20% to 45%. Under the trend of rapid market development + localization process, we believe that domestic manufacturers with technical reserves and customer expansion resource advantages in the new energy segment (electric vehicles, wind and solar storage) are expected to take advantage of the double carbon Dongfeng to enjoy the dividends of the first-mover advantage in the blue ocean period of rapid market growth.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].