Incidents:
On January 9, the company announced that its subsidiary Tony Semiconductor signed a “procurement contract” for silicon carbide substrates with downstream customers. At the same time, it was announced that it expects net profit to reach RMB 1-110 million in '22, an increase of 199%-229%.
A three-year cumulative procurement contract for 935,000 pieces was signed. On January 9, the company's wholly-owned subsidiary Tony Semiconductor and downstream customer T signed a “procurement contract” with downstream customer T. It was agreed that 135,000 6-inch silicon carbide substrates will be delivered to the customer from May to December 23, of which the MOS ratio will not be less than 20%. The unit price including tax is 5,000 yuan/piece, and the contract amount is 675 million yuan. In addition to the 18,000 remaining orders delivered in January 23 and April 23, the company's SiC substrate revenue is expected to reach 765 million yuan, an increase of more than several times over the same period in '22. 300,000 silicon carbide substrates were delivered in 24 years, of which the SiC MOS ratio is not less than 50%, the MOS price is 4,750 yuan/sheet, and the SiC SBD price is 4,275 yuan/piece. The estimated contract amount is 1.35 billion yuan, which is expected to increase by 100%. 500,000 silicon carbide substrates were delivered in 25 years, of which the SiC MOS ratio was not less than 55%, the MOS price in 2025 was 4510 yuan/sheet, the SBD price in 2025 was 4,060 yuan/piece, and the estimated contract amount was 2.15 billion yuan, which is expected to increase by 60%. At the same time, a higher 20% liquidated damages ratio was stipulated in the contract, which is highly binding. Currently, only a few domestic companies have the ability to ship 10,000 silicon carbide substrates. At the same time, the proportion of SiC MOS with high technical difficulties in 23/24/25 was 20%/50%/55%, respectively, demonstrating the company's strong technical strength on silicon carbide substrates and their high scarcity.
The SiC business revenue elasticity in 25 was 160%, and the net profit elasticity was 330% based on the delivery volume and unit price announced in the contract. It is estimated that the silicon carbide substrate contract amount between the company and T customers in 23/24/25 would be 77/ 13.5/2.15 billion yuan, respectively, accounting for 57%/100%/160% of the company's total revenue in '21, which has a high level of revenue elasticity. The gross margin of Wolfspeed, an international SiC leader, was 33.4% in FY22. Assuming that the company's SiC substrate business reached a gross profit margin of 33.4% in 25 years, calculated based on the company's current period expense rate of 11.7% and 25% income tax rate, it is estimated that the net profit margin of the company's SiC business in '25 is expected to reach 16.3%, contributing 350 million yuan in net profit, 3.3 times the median profit forecast of 105 million yuan.
Profit forecast and investment rating: According to the disclosure of the performance forecast, we adjusted the profit forecast. We expect the company's net profit to be 1.10/150 million yuan or 210 million yuan in 2022/23/24, corresponding PE to 148/102/73 times. Considering the high growth and scarcity of the company's silicon carbide business, we are optimistic about the company's future development and maintain the “buy” rating.
Risk warning: Technical production capacity does not progress as expected, risk of contract default, risk of product price fluctuation