Summary of Yangjie Technology Conference Call Company and Industry Overview - Company: Yangjie Technology (300373.SZ) - Industry: Semiconductors, specifically focusing on fuses and overcurrent protection Key Points and Arguments 1. Acquisition of Better Fuse: - Yangjie Technology plans to acquire 100% of Better Fuse for a total of Rmb2,218 million, which includes Rmb1,432 million for 55.8% from Dongguan Beiju and Rmb786 million for the remaining 44.2% from other shareholders [2] - This acquisition is expected to align the interests of both companies' management teams, as Dongguan Beiju will reinvest Rmb716 million into Yangjie shares with a 3-year lock-up [2] 2. Positive Outlook on Acquisition: - The acquisition is anticipated to enhance Yangjie's revenue mix, particularly in the automotive sector, aiming for a 30% auto revenue mix by 2030 [3] - Better Fuse's overseas customer base is expected to expand through cross-selling opportunities with Yangjie customers [3] - Both companies share core values focused on quality, customer orientation, and passion [3] 3. Revenue and Profitability Expectations: - Yangjie expects Better Fuse to contribute approximately Rmb1 billion in revenue by 2027, with a net profit target of Rmb200 million [4] - The management anticipates Better Fuse's revenue to grow at an 11% CAGR from 2024 to 2027, with net profit growing at a 21% CAGR during the same period [10][13] 4. Financial Projections: - Yangjie’s EPS forecasts for 2025, 2026, and 2027 have been raised by 6%, 11%, and 21% respectively due to Better Fuse's contributions [5][20] - Revenue projections for Yangjie are Rmb7,396 million in 2025, Rmb8,831 million in 2026, and Rmb10,422 million in 2027 [21] 5. Valuation and Price Target: - The price target for Yangjie Technology has been raised to Rmb80, reflecting an 18% upside from the current price of Rmb67.71 [7][22] - The stock is currently trading at 21x 2026 estimated EPS, below the 5-year average of 26x [5] 6. Market Dynamics: - The competitive landscape for fuses and overcurrent protection is viewed as more favorable compared to power discrete components, which is expected to enhance profitability for Yangjie [4][13] - Better Fuse has a diverse product range with over 200 product series and 9,000 specifications, catering to various end markets [17] Additional Important Insights - Synergies from Acquisition: - Yangjie plans to invest Rmb300 million in Better Fuse's automation equipment to improve operational efficiency [19] - The integration of ERP and OA systems is expected to further enhance Better Fuse's operational performance [19] - Risk Factors: - The market for fuses and overcurrent protection is smaller compared to power discrete, which may limit competition but also growth potential [16] - Qualification processes for suppliers in this industry can be lengthy, creating high switching costs for customers [16] - Long-term Growth Potential: - Yangjie aims to leverage its existing customer base and operational efficiencies to drive growth in the automotive and overseas markets [30][31] This summary encapsulates the key insights from the conference call regarding Yangjie Technology's strategic acquisition of Better Fuse, its financial outlook, and the anticipated synergies that will enhance its market position in the semiconductor industry.
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