Diamond superhard materials platform company with three-dimensional layout of photovoltaic & semiconductor business. Since its establishment in 1999, the company has focused on R&D, production and sales of diamond superhard materials. Its products include diamond wire, diamond grinding wheel products, etc. After more than 20 years of development, the company formed a photovoltaic+semiconductor dual-wheel drive pattern: companies in the photovoltaic field began selling electroplated diamond wire in small batches in 2011, and were the first domestic manufacturers to replace diamond wire; companies in the semiconductor field laid out grinding wheels (chamfered grinding wheels/backside thinning wheels), scribing cutters (resin soft/metal soft/electroplated soft/hard knives), CMP-Disk and other product lines around the application of diamond superhard materials on semiconductors, and at the same time introduced external teams to strengthen semiconductor cutting and grinding., throw away the layout on the device.
Demand for photovoltaic diamond wire is strong, and the company's production capacity expansion has entered a period of rapid growth, and the company's tungsten wire is expected to overtake cars in a curve. Downstream demand is strong due to stabilization/improved order production schedule for photovoltaic silicon materials. Combined with the trend of thinning wire, the unit consumption of diamond wire has increased demand for photovoltaic diamond wire. According to our estimates, global demand for photovoltaic diamond wire is expected to grow from 100 million kilometers to 260 million kilometers in 2021-2025, and CAGR will reach 26.4% in 4 years. The company independently designs diamond wire processing production lines (outsourced processing) to improve production efficiency and quality and build technical barriers; on the customer side, the company is deeply bound to Yuze, Jingao, Gaixin, and introduced customers such as Gao Jing and Shichuang, and the supply of diamond wire is in short supply. In response to strong demand, the company actively expanded production. The production capacity of fine lines for photovoltaics was about 1 million km/month in '22. It is estimated that 1.5 million km/month of production capacity will be added in March 23, and the company's production capacity will reach 4 million km/month by the end of '23. Furthermore, the company has a good layout of tungsten wire and diamond wires, and is expected to overtake cars on curves on the new track.
Focusing on cutting, grinding, and polishing processes, semiconductor thinning consumables are endogenously enriched, and semiconductor thinning equipment is arranged for epitaxial expansion.
Semiconductor consumables: Diamond superhard materials are widely used in semiconductor cutting, grinding and polishing processes. The total domestic semiconductor diamond tool market exceeds 3 billion yuan, but CMP polishing pad trimmers, back reduction wheels, dicing knives, etc. are basically monopolized by foreign manufacturers such as Japan's DISCO. The company began laying out semiconductor cutting and polishing consumables in 2015. Currently, it has broken through the back thinning wheel/chamfering wheel/soft knife/soft knife/hard knife/CMP-disk, etc., several major product lines are in Sun Moon, Long Light, Long Shade, etc. Major customers such as Huatian, Huahai Qingke, and SMIC Jingyuan are gradually verifying and measuring, The progress of localization is among the highest in the country. Semiconductor equipment: The semiconductor cutting and polishing equipment market has long been dominated by international giants such as Japan Disco. The company accelerated the layout of semiconductor equipment by introducing an external team and setting up Nanjing Sanxin. According to the company's research announcement, three prototypes of silicon rod grinding all-in-one machine, silicon wafer chamfering machine, and backside thinning machine will be launched one after another in the first half of 2023.
The chairman plans to fully subscribe for a fixed increase, demonstrating the chairman's confidence in the company's development. The company plans to implement the “41-million-kilometer ultra-fine diamond wire saw production project (phase I)”. The capital raised will not exceed 120 million yuan. After delivery, it will have an annual production capacity of 18 million kilometers of silicon slicing wire, which is expected to have good economic benefits. Chairman Zou Yuyao plans to use cash to fully subscribe for a fixed increase, demonstrating confidence in the company's development.
Profit forecasts and investment recommendations. The company has completed the layout of the two major sectors of semiconductors and photovoltaics. The rapid growth of downstream installations in the photovoltaic sector is compounded by the trend of thinning, and demand for photovoltaic diamond wire is rising, and the accelerated implementation of the company's new production capacity is expected to resolve the production capacity bottlenecks that limit the company's development; the company's cutting blades, grinding wheels, and CMP-disk products in the semiconductor field are expected to enter a period of rapid expansion when customers make breakthroughs. We expect the company's net profit to the mother in 2022-2024 to be 0.10/1.50/251 million yuan respectively. Deller New Materials/Meichang Share/High Test Co., Ltd. is the company's diamond wire industry, and Dinglong Corporation/Guangli Technology is the company's semiconductor industry. It was selected as a comparable company. Considering the company's high growth in the semiconductor business/rapid growth of the semiconductor business and the urgency of domestic substitution, the company was given 28 times PE in 2023, with a target price of 40 yuan. For the first time, coverage was given a “strong push” rating.
Risk warning: the impact of the epidemic, downstream demand falling short of expectations, production expansion falling short of expectations