Main points of investment

Event: the company publishes its 2022 semi-annual report. In the first half of 2022, the company achieved operating income of 633 million yuan, + 27.62% compared with the same period last year; net profit of 78 million yuan, + 37.45%; and non-return net profit of 66 million yuan, + 19.97% of the same period last year. 2022Q2 achieved revenue of 341 million yuan, month-on-month ratio of + 17%, year-on-year + 25%; net profit of 42 million yuan, month-on-month ratio of + 17%, year-on-year + 49%; deduction of non-parent net profit of 35 million yuan, month-on-month ratio of + 13%, year-on-year + 23%.

Comments: 1, half-year performance slightly exceeded expectations, consumer electronics business broke out: in the first half of 2022, thanks to the domestic alternative drive of electronic ceramic shell, the company's revenue and return net profit maintained a high growth rate, the gross profit margin fell to 28.14% year-on-year, and the net profit margin increased 0.88pct to 12.31%. In terms of R & D expenses, the company continued to increase R & D investment in core product areas. R & D expenses increased by 35.04% to 85.4493 million yuan over the same period last year, accounting for 13.49% of revenue, while sales expenses and financial expenses decreased. Management expenses increased due to the expansion of the company's scale.

Sub-business point of view: ① communications electronic ceramic shell business in the optical module market growth is stable, 5G demand has declined, through the domestic replacement brought about by the share increase, to achieve the sustained growth of optical device electronic ceramic shell business, wireless power devices, especially the third generation semiconductor materials products because of the growth period of the industry is still fast. The revenue of the company's electronic ceramic shell business for communication devices was 471 million yuan, an increase of 25% over the same period last year, accounting for 74.45% of revenue, gross profit margin fell 3.77pct to 27.47% year-on-year, and operating costs increased more than the same period last year. ② 's consumer electronics ceramic shell and substrate broke out against the trend, revenue growth exceeded expectations, and the stable batch delivery of consumer 3D-sensor products helped customers realize the localization of such products, becoming the only domestic manufacturer in this field that could achieve batch delivery. Revenue increased by 133% to 95 million yuan compared with the same period last year, accounting for 15.01% of total revenue. And due to the relatively high degree of standardization of consumer electronics products, the scale effect gradually appeared, the gross profit margin increased to 31.84% compared with the same period last year, the profitability continued to strengthen, and new business development achieved remarkable results. The revenue of ③ automotive electronic parts business is 32 million yuan, accounting for 5.12% of the total revenue. ④ in the context of tight production capacity of the company to take the initiative to adjust the low gross margin business, stripping the industrial laser ceramic shell business.

2. Electronic ceramic shell "outshines others", benefiting from the outbreak of demand for new energy vehicles: the performance of the company's optical device ceramic shell is gradually catching up with that of overseas giants, and its share is increasing continuously under the background of domestic alternative acceleration. against the background of the decline in 5G demand, there is still a lot of room to improve the market share. Wireless power devices / third-generation semiconductors (GaN power tube, LDMOS power tube, etc.) ceramic shell takes the lead in mass production, the main customers include China Electric Power, Infineon, NXP, etc., technology and product strength has been recognized by domestic and foreign giants, has scale income, sustained high growth Consumer electronics ceramic shell and substrate new business explosive growth as scheduled, the company accelerated consumer electronics ceramic shell (including sound meter crystal oscillator, 3D sensor modules, SAW filters and other downstream products) business expansion, remarkable results, IPO investment projects to expand production all for consumer electronics, three-year production target capacity of 4.405 billion pieces, large output space, new consumer electronics production line is accelerating the construction, tamping the foundation of high growth in the future. IGBT (high-end aluminum nitride material has been in small batch, certified by domestic IGBT module manufacturers, silicon carbide module is fully prepared with AMB packaging technology), lidar ceramic shell / millimeter wave radar (R & D) and other new automotive ceramic shell technologies are fully prepared and will be gradually released. The company has successfully expanded from optical devices to consumer electronics, power devices / third-generation semiconductors, IGBT, lidar and other electronic ceramic shell areas, the standard of Japan Kyocera, long-term growth space.

3. The reorganization plan has been actively promoted, and the silicon carbide MOSFET chip leader is "about to come out": the third-generation semiconductor assets of the thirteen CLP companies, which the company intends to issue shares to acquire, are the domestic gallium nitride / silicon carbide market leaders; the Bowei integration sales contract among the gallium nitride PA business assets to be acquired shows a good growth situation in the first half of the year, the production capacity has been greatly increased, and the products are delivered on schedule, which is expected to maintain steady growth. Guolian Wanzhong has inherited the silicon carbide chip device technology accumulated by 13 institutes for many years, and has made a breakthrough in the field of silicon carbide MOS used in the leading domestic vehicle manufacturer OBC. The silicon carbide MOS used in the main drive has high value, and it is expected to break through gradually in the future, leading the domestic market. The company has built a scarce IDM model, which is expected to accelerate capacity expansion after listing, with the advantages of technology and customers, to seize the market and play a synergy effect as an important downstream of electronic ceramic shell. Wolfspeed, the global leader in silicon carbide, reported that Q4 revenue in fiscal 2022 exceeded market expectations by 9.96%, while revenue guidance in 2026 is expected to increase by 30% to 40% from the target of $2.1 billion proposed at the end of last year. On Mae Q3 performance guidance is expected to exceed market expectations again, estimated at US $20.7-2.17 billion. The guidance of overseas silicon carbide giants exceeded expectations, once again verifying the high prosperity of the SiC industry. Guolian Wanzhong invested 313 million yuan in "key Technology Research and Development Project of Silicon Carbide High Voltage Power Module"

Construction is expected to start on January 1, 2023; previously, the gallium nitride and silicon carbide expansion project is expected to be completed by the end of the year, with broad room for future growth.

4. Profit forecast and investment advice: in the first half of 2022, the company's income and performance achieved steady growth, consumer electronics ceramic shell business grew against the trend, and gross profit margin continued to improve, helping the company's performance to exceed expectations. The growth logic of electronic ceramic shell is clear, and the company has built three core competitive advantages of formula, design and craftsmanship. it is "outstanding" in China, continues to take the lead in the field of traditional communications, and successfully develops in new application fields such as consumer electronics and new energy vehicles (light-emitting radar, IGBT). The proposed acquisition of scarce gallium nitride / silicon carbide assets, IDM integration advantage is significant, silicon carbide MOS broke through the domestic head of new energy vehicle plant, with the active promotion of the restructuring plan, the target capacity of the acquisition continues to expand, with more room for growth in the future. Without considering the merger and acquisition, we maintain the profit forecast and expect the company to achieve a net profit of 1.72,2.68 and 352 million yuan from 2022 to 2024, corresponding to the closing price on August 23, the PE is 135.9, 87.4 and 66.5 times.

5. Risk hint: the progress of asset injection is not as expected; the risk related to international trade friction; the risk of new product research and development.