Event: the company issued the announcement of "Strategic Purchasing intention Agreement". Hunan Sanan, a wholly-owned subsidiary, signed a strategic purchasing intention agreement with the buyer of a company mainly engaged in new energy vehicle business. Promise to ensure the annual purchase of silicon carbide chips from Hunan Sanan from 2024-27, and the excess will be determined through consultation between the two parties. The agreed amount of the silicon carbide chip order is based on market price perception in 2022 (including R & D business demand generated in 2023) and is estimated to total RMB 3.8 billion (including tax) by 2027.
Product structure optimization, silicon carbide business volume growth. Due to the repeated epidemic and shrinking downstream demand, the sales of traditional LED products are weak, and the proportion of high-end LED continues to increase; gallium arsenide radio frequency and filter business is affected to a certain extent; and the power electronics business is advancing rapidly and the industry demand is strong. In the first three quarters, the company achieved revenue of 10.012 billion yuan, year-on-year + 5.04%, net profit of 987 million yuan, year-on-year-23.27%, gross profit 18.96%, year-on-year-3.99pcts, net profit 9.86%, year-on-year-3.64pcts.
The layout of the whole industry chain and the production line of production capacity have been put into production. The company's standard Wolfspeed, has formed a SiC industry chain layout of long crystal, substrate, epitaxy, chip preparation and packaging, with strong integration advantages and first-mover advantages. It is helpful to grasp the production process of each link when the technical route is uncertain, so as to obtain the advantage of improving the yield. For example, Hunan Sanan Semiconductor Project has a total investment of 16 billion yuan, which covers the whole industry chain from crystal growth, substrate, epitaxy, chip preparation to packaging in two phases, with a supporting capacity of about 360,000 wafers per year.
The company disclosed in the mid-2022 report that gallium arsenide RF production capacity has been expanded to 12000 wafers / month, optical technology production capacity 2000 wafers / month, Hunan Sanan power electronics silicon carbide production capacity 6000 wafers / month, power electronics silicon-based gallium nitride production capacity 1000 wafers / month. Production capacity is gradually released, and delivery capacity continues to improve.
Cooperate with downstream customers to demonstrate product capability. The Li Auto Inc. power semiconductor R & D and production base, jointly funded by Hunan Sanan Semiconductor and Li Auto Inc., officially started construction on August 24 this year.
It is expected to enter the stage of equipment installation and commissioning after completion in 2022, and start sample trial production in the first half of 2023. After it is officially put into production in 2024, it is expected that the production capacity will gradually increase and eventually reach the annual production capacity of 2.4 million automotive silicon carbide half-bridge power modules. In terms of products, on September 2, Hunan Sanan released a new series of 1200V silicon carbide MOSFET series, including 1200V 80m Ω / 20m Ω / 16m Ω, all from Hunan Sanan's independent and reliable 6-inch full-chain integration platform. This is the company's major breakthrough from diodes to MOS, the release of silicon carbide MOSFET series aims to achieve a comprehensive breakthrough in vehicle and new energy vehicle parts in 2023, but also lay a solid foundation for this big order.
Investment advice: the company's SiC business is highly competitive in the industry and is expected to continue to benefit from the volume of SiC projects, valuation and performance. Traditional business is also expected to be repaired as industry demand picks up. The increased holdings of some directors and management demonstrate their confidence in the company's long-term investment. In 2022-24, we estimate that the company will achieve an operating income of 13577 plus 21.413 billion yuan, a net profit of 13.033 million and a corresponding PE of 45.39 million, which is 31.72 times higher than that of the parent company, with a "overweight" rating.
Risk hint: the progress of new product development and customer introduction is not as expected; the downstream demand is not as expected.