Tomorrow, the Science and Technology Innovation Board will welcome an IPO.

Gelonghui learned that Chengdu Jiachi Electronic Technology Co., Ltd. (hereinafter referred to as “Jiachi Technology”) will launch a subscription on November 25, and the sponsor is CITIC Securities Co., Ltd.

The current issuance price of Jiachi Technology (688708.SH) is 27.08 yuan/share, which corresponds to the lowest price-earnings ratio before and after deducting non-recurring profit and loss in 2023, which is 20.72 times, lower than the average static price-earnings ratio of the industry in the last month (53.33 times) published by China Securities Index Co., Ltd., and lower than the average static price-earnings ratio (57.58 times) of comparable companies in the same industry.

As of November 24, of the 86 companies listed on A-shares this year, only 1 broke on the first day of listing and 1 closed. The remaining 84 companies all closed higher on the first day. The opening day of the listing had an average increase of 206.79%, and the average closing increase was over 228.15%.

Since there are very few breakouts on the first day of listing of A-share IPOs this year, and the yield is impressive, if sold on the first day of listing after winning, there is a high probability of making money, so it is recommended to actively participate in the subscription.

Jiachi Technology was founded by Academician Deng Longjiang in 2008 and is headquartered in Chengdu, Sichuan. Born in 1966, Deng Longjiang graduated from the University of Electronic Science and Technology of China with a master's degree in electronic materials. He is an academician of the Chinese Academy of Engineering and a professor at the University of Electronic Science and Technology of China. Academician Deng Longjiang has long been engaged in research on basic theory, preparation technology and engineering applications in the field of electromagnetic radiation control materials.

Since its establishment, Jiachi Technology has been engaged in the electromagnetic functional materials and structures (EMMS) business. The company's products are mainly military products, mainly used in the field of weapons and equipment stealth, accounting for more than 95% of military business revenue during the reporting period.

The company's main products include stealth functional coating materials, stealth functional structural parts, and electromagnetic compatibility materials, which are high-performance composites.

Stealth coating materials accounted for 69.39% of the company's revenue from January to June 2024. They are materials that absorb electromagnetic waves. After being applied to the surface of weapons and equipment, they can reduce their radar scattering cross section, and are mainly used on the surface of stealth weapons and their components.

Stealth functional structural parts accounted for 27.56% of the company's revenue from January to June 2024. They are structural materials with both electromagnetic absorption and high strength characteristics. They are mainly used in key parts of weapons and equipment that require integration of structural functions and stealth functions.

Electromagnetic compatibility materials accounted for 2.6% of the company's revenue from January to June 2024. They are materials with electromagnetic wave absorption functions. They can effectively solve electromagnetic interference within and between devices, and are mainly used in consumer electronics, communication equipment, etc.

Composition of main business revenue by product category. Source: Prospectus

Electromagnetic compatible materials With the application of consumer electronics, automotive electronics, etc., thin, lightweight, ultra-wideband electromagnetic compatibility materials will usher in broad opportunities.

According to Marketsand Markets statistics, the global electromagnetic compatibility materials market will continue to grow rapidly. The market size is about 6.8 billion US dollars in 2020, and the market size is expected to reach 8.2 billion US dollars in 2025.

Global electromagnetic compatibility materials market size and forecast, source: prospectus

In terms of financial data, in 2021, 2022, 2023, and January to June 2024 (reporting period), Jiachi Technology's operating income was 0.53 billion yuan, 0.769 billion yuan, 0.98 billion yuan, and 0.368 billion yuan, respectively; during the same period, the company's net profit to mother after deduction was 0.298 billion yuan, 0.452 billion yuan, 0.523 billion yuan, and 0.2 billion yuan, respectively.

According to the prospectus, the company expects to achieve operating income of 1.02 billion yuan to 1.15 billion yuan in 2024, a year-on-year change of 3.99% to 17.25%; achieve net profit attributable to shareholders of the parent company of 0.572 billion yuan to 0.655 billion yuan, a year-on-year change of 1.47% to 16.20%.

Key financial data of the company, source: prospectus

During the reporting period, the company's comprehensive gross margin was 82.58%, 82.15%, 76.91%, and 78.29% respectively. The gross margin showed a downward trend but was at a high level overall.

Compared with the same industry, Jiachi Technology's comprehensive gross margin is higher than the average of listed companies in the military materials industry. Specifically, the company's comprehensive gross margin is at the same level as Zhongjian Technology, which is higher than the overall gross profit margin of other listed companies in the military materials industry. There are large differences in the overall gross margin of each company, mainly due to differences in product form and use.

Comparison of gross margins of companies in the same industry, source: prospectus

Jiachi Technology is a supplier of military supporting products in the field of electromagnetic functional materials and structures, with a high concentration of downstream customers.

The aviation industry, China Telecom, and Jiuzhou Holdings are the company's top three customers. The products sold by the company to China Telecom and Jiuzhou Holdings are integrated by these customers, and the complete set of products is ultimately mainly sold to the aviation industry. During the reporting period, the company's revenue to the aviation industry accounted for 58.34%, 65.81%, 73.13%, and 81.04%, respectively, and the share of sales to the aviation industry showed an upward trend.

In addition, the military industry generally has characteristics such as a long project development and testing cycle, complicated payment settlement procedures, and quarterly settlement. At the end of each period of the reporting period, the company's accounts receivable and notes receivable together accounted for 66.91%, 88.16%, 100.34%, and 240.40% of each period's revenue (unannualized). Since 2021, the share of accounts receivable in revenue has continued to increase, and the turnover rate has continued to decline.