TORCH ELECTRON(SH:603678) Tianfeng Securities·2024-02-01 16:00Investment Rating - The report maintains a "Buy" rating for the company, with a target price indicating a potential upside of over 20% within the next six months [12][26]. Core Views - The company is expected to face a significant decline in net profit for 2023, with estimates ranging from 310 million to 350 million yuan, representing a year-on-year decrease of 56.33% to 61.32% [1]. - The core profit-generating business, self-produced components, is under pressure due to a recovery in downstream demand and intensified market competition, leading to a decline in both revenue and net profit [1][9]. - The company is actively adjusting its marketing strategies to adapt to changing demand trends, with expectations of gradual recovery in its self-produced components business as military demand increases [2][3]. Financial Performance Summary - For the first three quarters of 2023, the company reported a gross margin of 31.58%, down 12.87 percentage points year-on-year, and a net profit margin of 10.61%, down 15.38 percentage points year-on-year [2]. - The company’s operating expenses ratio reached 15.51%, an increase of 3.05 percentage points year-on-year, primarily due to rising salaries and depreciation [2]. - The new materials segment has shown rapid growth, with revenue of 137 million yuan in the first three quarters of 2023, a year-on-year increase of 112.61% [3]. Business Outlook - The company is focusing on military MLCC (Multi-Layer Ceramic Capacitors) to strengthen its market position and is also expanding into active components, which are expected to open new growth avenues [10]. - The new materials business is positioned to benefit from strong demand, particularly in aerospace and nuclear industries, with significant investments in R&D [3][10]. - The company’s net profit forecasts for 2023-2025 have been adjusted to 335 million, 491 million, and 722 million yuan, respectively, with corresponding P/E ratios of 26.31, 17.95, and 12.21 [3][11].