TORCH ELECTRON(603678) Dongxing Securities·2025-01-22 11:31Investment Rating - The report initiates coverage with a "Buy" rating for the company [10]. Core Viewpoints - The company is a leading player in the ceramic capacitor industry, focusing on three strategic segments: components, new materials, and international trade [15][21]. - The MLCC market is expected to see steady growth, with significant potential for domestic substitution as the industry matures [3][35]. - The company is positioned to benefit from the modernization of military equipment, with the domestic military MLCC market projected to reach 5.1 billion yuan in 2024 [4][41]. - The new materials segment is emerging as a second growth curve, particularly in high-performance ceramic fibers, which are critical for aerospace applications [5][43]. Summary by Sections Company Overview - The company has over 30 years of experience in the ceramic capacitor industry and is recognized as a leader in the domestic market [1][15]. - It has established strong partnerships with various state-owned enterprises and has been involved in multiple national special research projects [1][15]. Business Segments - The company operates through 14 wholly-owned and controlled subsidiaries, with clear divisions of labor across its three strategic segments [2][21]. - The main revenue source is from electronic components, particularly capacitors, while the share of revenue from self-produced new materials is gradually increasing [2][27]. Market Demand and Trends - The MLCC market is dominated by Japanese and Korean companies, but there is a growing opportunity for domestic manufacturers to capture market share [3][35]. - The trade deficit in MLCC has been narrowing, indicating a potential for increased domestic production [3][35]. Financial Performance and Forecast - The company experienced a revenue decline in 2023 due to overall market demand slowdown, but there are signs of recovery with higher-value product shipments in the third quarter of 2024 [2][25]. - Revenue forecasts for 2024-2026 indicate a recovery trajectory, with expected growth rates of -15.24%, 23.84%, and 18.19% respectively [10][54]. Investment Recommendations - The company is expected to benefit from the recovery in the MLCC business and the growth of its non-MLCC segments, particularly in new materials [10][54]. - The report projects net profits of 306 million yuan, 417 million yuan, and 566 million yuan for 2024, 2025, and 2026 respectively, with corresponding EPS of 0.67, 0.91, and 1.23 yuan [10][54].