Tony Electronics: a rookie of domestic silicon carbide substrate ready to be developed. Tony Electronics was founded in 2008 and went public in 2017. The company started with two "fist products" of ultra-fine electronic wire (coated wire and ultra-fine conductor), cut into diamond cutting line in 2017, and expanded new products such as photovoltaic film, lithium battery ear of new energy vehicle, aluminum-plastic film and silicon carbide substrate with diversification strategy in recent years. In 2021, the company's revenue is 1.34 billion yuan, many years of research and development is about to usher in the harvest, SiC substrates and other products are expected to increase.
The growth of downstream demand promotes the industrialization of silicon carbide, and the conductive silicon carbide substrate meets the opportunity of domestic substitution. Thanks to the excellent electrical performance of SiC substrates and the rapid growth of downstream demand such as new energy vehicles and new energy power generation, the global market for conductive SiC substrates is rapidly expanding. According to the market size of Yole,SiC power devices, it is expected to grow from US $1.1 billion in 2021 to US $6.3 billion in 2027, with CAGR reaching 34% in 2021-2027. If the substrate cost accounts for 47%, the market size of SiC substrates will be about $3.9 billion by 2027, of which the market size of conductive substrates is about $2.3 billion. At present, the global SiC conductive substrate is monopolized by Wolfspeed of the United States, 26 of the United States, and Roma of Japan, with a combined share of nearly 90%. There is an urgent demand for domestic alternatives. With the rapid expansion and share of downstream demand, growth is expected in the future.
Fund-raising and construction of 120,000 pieces of conductive silicon carbide substrate per year, and 20,000 large orders have been signed to guarantee revenue. In 2017, the company reserves R & D SiC projects. In 2021, the company raised 330 million yuan to increase the production capacity of SiC substrate, which is expected to reach production in November 2023. According to the company's three quarterly reports, the company signed a "procurement contract" with downstream customers in September, agreeing that Tony Semiconductor would deliver 20,000 pieces of 6-inch silicon carbide substrates to the customer, including tax sales of 100 million yuan. So far, 50% payment for the contract has been received. At present, the company's SiC substrate customers are mainly Dongguan Tianyu, and Hantiancheng also has products to send samples.
Both of them are core suppliers of domestic epitaxial wafers and are greatly expanding production. With the increase in production capacity of Tianyu and Tiancheng, the company is expected to benefit from the simultaneous growth of its demand for upstream substrates.
Profit forecast and investment rating: we expect the company's annual revenue in 22-23-24 to be RMB 100 million on 20-28-38, an increase of 51%, 37%, 36%, and a net profit of RMB 15,000,000, corresponding to PE of 95x/64x/48x in 22-23-24. Taking into account the company's SiC substrate recently made a major breakthrough, high growth next year, maintain the "buy" rating.
Risk tips: high customer concentration; product progress is not as expected; new energy vehicle penetration is not as expected.