The performance slightly exceeded expectations. The company released its 2021 annual report, with an operating income of 2.467 billion yuan, an increase of 36.2% over the same period last year. The net profit attributable to shareholders of listed companies was 146 million yuan, up 67.8% over the same period last year. After deducting the net profit loss belonging to shareholders of listed companies, the loss decreased by 53.0% over the same period last year.

Support the main points of rating

The volume of large silicon wafer business is obvious, and the yield has improved steadily. In 2021, the company's 300mm wafer revenue reached 690 million yuan, an increase of 117.9% over the same period last year; sales of 175.2 million wafers, an increase of 93.6% over the same period last year; the average sales price was 393 yuan per chip, an increase of 12.6% over the same period last year; and the gross profit margin was-6.2%, a substantial increase in 28.6pcts over the previous year. During the reporting period, the subsidiary Shanghai Xinyi 300mm semiconductor wafer production capacity has completed the installation and construction of 300,000 wafers per month, and started the expansion construction of 300,000 wafers per month. With the steady improvement of the yield of 300mm wafers and the emergence of the advantages of production capacity and scale, the price of large wafers under the mismatch between supply and demand in the industry is expected to increase, and the profitability of 300mm wafer business is expected to continue to improve.

200mm and below silicon wafer business is growing steadily, and automotive electronics applications are driving demand. In 2021, the company's 200mm wafer revenue reached 1.42 billion yuan, up 15.8% from the same period last year; sales volume was 497.2 million, up 33.6% from the same period last year; the average sales price was 286.7 yuan per chip, down 13.4% from the same period last year; gross profit margin was 21.5%, down 0.3pcts from the same period last year, mainly due to changes in product structure. While expanding the production capacity of 200mm SOI wafers during the reporting period, the company further increased production capacity by removing bottlenecks and improving production efficiency, optimized product structure, and launched a production expansion plan for 200mm epitaxial wafers for automotive electronic applications to meet the growing market demand of downstream customers.

Demand for 200mm wafers continues to improve and manufacturers have fewer production expansion plans than 300mm wafers. As the boom continues, the company is expected to continue to benefit from the supply advantage of high-end segments.

The advanced manufacturing process continues to achieve breakthroughs, leading the domestic replacement of silicon wafers. During the reporting period, the company successfully passed the technical certification of 300mm semiconductor wafers for 14nm logic products, realized the batch supply of 300mm semiconductor wafers for 14nm process node applications; successfully developed and verified 300mm semiconductor wafers for 19nm DRAM, and made a breakthrough; successfully passed the certification of 300mm polished wafers for 64-layer and 128-layer 3D NAND applications, and realized mass supply. The company has gradually achieved great-leap-forward development from 40-28nm to 20-14nm advanced technology nodes, and then to defect-free silicon wafer technology for memory.

Valuation

Downstream wafer expansion accelerated, silicon wafer supply continued to be tight, with the company's 300mm silicon wafer new capacity utilization steadily climbing, raising the company's profit forecast, it is estimated that the 2022-2024 EPS will be 0.08,0.11,0.14 yuan respectively, and the corresponding PE will be 284.3 times, 202.9 times and 166.5 times respectively. Maintain the overweight rating.

Main risks faced by rating

The production progress of the fund-raising project is not as expected, the progress of research and development is blocked, and the downstream demand is not as expected.