Company profile
The company is mainly engaged in R&D, design, production and sales of power semiconductor chips and devices.
The main products include thyristors, protective devices, diodes, MOSFET devices and chips, SiC/GaN devices, etc. Thyristors, diodes, etc. use IDM vertical integration mode, and MOSFETs use Fabless+ sealing and testing mode. Due to weak consumer demand, the company's traditional businesses such as thyristors are under pressure. The main business revenue of the 1-3Q22 company was 1,285 million yuan, down 4.55% from the previous year, and the net profit of the mother was 293 million yuan, -24.54% year on year.
Investment logic
The vehicle grade product layout is comprehensive, and the proportion of MOSFETs has increased rapidly. The company's automotive grade products (MOS, TVS) can be widely used in automotive power steering, oil pumps, water pumps, car windows, seats, etc. At present, SGT MOS has been used in vehicles. As customer development is good, mass production of super-junction MOS has begun. As the production capacity of the company's 8-inch production line gradually increases, we are optimistic that demand for medium and high voltage power semiconductors will increase and domestic substitution opportunities. Vehicle grade products are expected to grow rapidly. The MOSFET localization rate in 2021 is 30.5%, and the MOSFET localization rate is expected to reach 64.5% by 2026. According to the company's announcement, the car-grade packaging production line project funded by convertible bonds will reach an annual sales scale of 2 billion yuan after delivery. By the end of the third quarter of 2022, a total project volume investment of 347 million yuan has been completed, and construction of the project will be completed by the end of 2023. We anticipate that production capacity for the company's fund-raising projects will gradually be released in the future, and the MOSFET business will become a new driving force for the company's performance growth.
Demand for industrial control is clearly picking up, and demand in the home appliances and consumer electronics industries is expected to gradually recover. The company's traditional business of thyristors and protective devices mainly targets fields such as industrial control, home appliances, and consumer electronics. 1-3Q22, the company's thyristor business experienced a sharp decline (YoY -41.2%). The short-term downturn in global semiconductors will not change the long-term positive pattern. WSTS predicts that the size of the semiconductor market will fall -4.1% year on year 23 to 556.6 billion US dollars. We believe that this wave of global semiconductor downturn is expected to bottom out in 3Q23. According to industry chain research information, it has been clear that industrial customers have increased orders since December '22, and we expect that demand for businesses such as thyristors and protective devices will gradually recover in the future.
Profit forecasts, valuations, and ratings
It is predicted that the company will achieve net profit of 3.78/497/649 million yuan in 2022-2024, compared to -23.88%/+31.24%/+30.69%, corresponding EPS of 0.51/0.67/0.88 yuan.
The company is a local power semiconductor IDM company. Considering the increase in the proportion of the company's car-grade products and MOSFET shipments in the future, the company was given 35 times PE in 2024, corresponding to the target price of 31.0 yuan/share, covered for the first time, and given a “buy” rating.
Risk warning
Risk of technology iterations and product upgrades falling short of expectations; risk of increased market competition; risk of dependence on imported equipment; risk of pressure on convertible debt-for-equity swaps.