Investment Thesis

The 2022 earnings forecast is lower than expected, and the high prosperity of the new energy market is expected to boost the company's long-term

performance. The performance growth was slightly lower than expected due to the company's exchange rate fluctuations, the provision for inventory and price decline in 22Q4.

The high growth of the new energy magnetic component business is due to the bilateral optimization of the supply and demand pattern of the

magnetic component market. According to our calculations, the market size of magnetic components in the fields of automotive electronics, photovoltaic energy storage, and charging piles is expected to reach RMB40/10/6 bn by 2025, corresponding to CAGR of 2021-2025 is 30/22/19%.

Click builds strong alliances by M&A Highlight, and the synergistic effect

is highlighted. In 22Q3, Click held a 64.25% stake in the Highlight, a domestic magnetic component manufacturer, and gained control. In the future, the company is expected to achieve multi-faceted synergy with Highlight: 1) Product structure synergy: After the completion of the merger, Click will consolidate its strong position in the field of new energy and further expand in the field of communications. 2) Customer collaboration: The company has significant advantages in overseas markets and customer resources, and the export sales ratio exceeds 50%. 3) Financing improvement: After Click's acquisition of Highlight, it is expected to improve its financing capabilities.

Earnings Forecast & Rating: We revise down the company's 2022-2024 net profit from RMB0.15/0.4/0.56bn to RMB0.12/0.4/0.56bn, corresponding to PE of 50.4x/16.0x/13.0x. We maintain the "Buy" rating.

Risks: Downstream market demand is less than expected; industry competition intensified; raw material price rose; investment profit and loss fluctuation risk.