Event: the company recently issued a 2022Q1 performance announcement. During the reporting period, the company achieved operating income of 786 million yuan, an increase of 47.09% over the same period last year, an increase of 12.42% over the previous year, and a net profit of-15.1522 million yuan, down 267.19% from the same period last year. The net profit after deducting non-return was-3.2805 million yuan, an increase of 92.8%.

The company's revenue grew steadily in the first quarter, deducting non-net profit. In the first quarter of 2022, the company achieved revenue of 786 million yuan, year-on-year + 47.09%, month-on-month + 12.42%, of which non-net profit was deducted from-3.2805 million yuan, reducing losses by 42.3108 million yuan compared with the same period last year, mainly because the company's production and sales of silicon wafers continued to increase steadily during the reporting period. the advantage of scale leads to the continuous growth of profitability. During the reporting period, the company realized net profit of-15.1522 million yuan, down 267.19% from the same period last year. It is mainly affected by the fluctuation of the fair value of Semiconductor Manufacturing International Corporation Science and Technology Innovation Board's listed stocks invested by the Juyuan Core Star Industrial Fund and the changes in non-recurrent profits and losses such as government subsidies recognized in the current period. Combined with the company's operating data from January to February, the company achieved a monthly revenue of about 276 million yuan in March, deducting a non-return net profit of about 4.78 million yuan to achieve a monthly turnaround.

The company is a leading manufacturer of 12-inch wafers in China with leading technical strength. The company has a deep accumulation in the field of 12-inch semiconductor wafers and leads the domestic market in light-doped wafer technology. By the end of 2021, the company's 12-inch semiconductor wafer 300000 wafer / monthly production line has been completed, becoming the largest mass production of 12-inch semiconductor wafer positive products in China, and achieving full coverage of logic, storage, CIS and other applications. In addition, the company will build a new production capacity of 300,000 wafers per month on the basis of the production capacity of 300,000 wafers per month, which will add new momentum to the follow-up development of the company. In the field of 8-inch and below wafer products, the company continues to maintain high capacity utilization with high industry demeanor, expanding 8-inch SOI wafer capacity while optimizing production line capacity and product structure, and at the same time launching an 8-inch epitaxial wafer expansion plan for automotive electronic applications to further meet the growing market demand of downstream customers. Further enhance and consolidate the company's supply advantage in high-end segments of 8-inch and below silicon wafer products.

The supply and demand pattern of silicon wafers continues to be tight, and domestic wafer manufacturers have entered a golden period of development. Since 2020, with the outbreak of the epidemic, the rise of home office, online education and other applications, driving the development of the semiconductor industry, silicon wafers began to re-enter the growth period. We judge that with the development of 5G, Internet of things, new energy vehicles, photovoltaic and other fields, the high demand for silicon wafers will remain stable for a long time in the future. According to SUMCO data, the global demand for 8-inch wafers is about 6 million wafers per month at the end of 2021, and the demand for 12-inch wafers is about 7.5 million wafers per month. The terminal application market, led by 5G smartphones and data centers, will continue to grow in the future, and it is expected that the global demand for 12-inch wafers will exceed 9 million wafers per month in 2025, and some overseas manufacturers have scheduled their current orders to 2026. With the transfer of the semiconductor industry to China for the third time, the replacement of domestic silicon wafers is timely. We expect Chinese mainland 8-inch and 12-inch wafer demand to reach 1.1m and 1.4m wafers per month in 2022, and about 1.6m / month and 1.8m / month in 2025. At present, only a small number of domestic 8-inch silicon wafer manufacturers can achieve large-scale production, and the domestic production rate of 12-inch silicon wafers is less than 10%, so there is an urgent need for domestic replacement and acceleration. At a time when global supply is tight and overseas manufacturers give priority to international wafer orders, we expect that downstream customer product verification by domestic wafer manufacturers will be speeded up, while superimposed high wafer prices will usher in a golden period of development in 2022 and 2023.

Investment suggestion: we expect the company's net profit in 2022, 2023, and 2024 to be 228,324,435 million respectively. We select four semiconductor materials companies with similar business as comparable companies. The average PB values of comparable companies in 2021-2022 are 5.7,5.5, and the PB values of the company in 2021-2022 are slightly lower than the average. Considering that the company, as a leading manufacturer of domestic large silicon wafers, is in the lead in the technical strength of 12-inch light-mixed large silicon wafers, with the outbreak of downstream demand such as 5G and AI, it is expected to give full play to its own technological advantages to accelerate the replacement of domestic semiconductor large silicon wafers, with a certain industry scarcity, the first coverage to give "buy" rating.

Risk prompt events: 1) silicon wafer scene demeanor may not be as expected; 2) new production capacity expansion is not as expected; 3) upstream raw material price increase risk; 4) research and use information update is not timely.