Incidents:
The company published its 2022 annual report and 2023 quarterly report. According to the announcement, in 2022, the company achieved revenue of 2,914 million yuan, an increase of 14.69% over the previous year; achieved net profit of 688 million yuan, an increase of 14.57% over the previous year; and achieved net profit of 557 million yuan after deducting non-return to the mother, a decrease of 4.70% over the previous year.
The first quarter of 2023 achieved operating income of 632 million yuan, a year-on-year decrease of 16.40%; net profit of returned mothers was 34 million yuan, a year-on-year decrease of 85.53%, and net profit of non-return mothers was 23 million yuan, a year-on-year decrease of 89.94%.
Results grew steadily in '22, and profit margins stabilized in 23Q1:
In 2022, the company was affected by the decline in industry sentiment, and the overall performance growth rate slowed. On a quarterly basis, Q4 2022's single-quarter revenue was 636 million yuan, down 19.29% from the previous year, down 10.93% from the previous quarter; the net profit returned to the mother in the single quarter was 46 million yuan, down 76.34% from the previous year, down 66.43% from the previous quarter; the gross margin for the single quarter was 29.40%, down 7.22pcts from the previous quarter. Revenue for Q1 2023 fell 16.40% year on year and 0.55% month on month; Guimu's net profit fell 85.53% year on year and 25.76% month on month. The gross margin for a single quarter was 29.67%, up 0.27 pcts from the previous quarter. The decline in performance narrowed month-on-month, and gross margin steadily rebounded month-on-month in the first quarter. According to the announcement, the main reason for the year-on-year decline in performance is 1) the prices of some of the company's products have been lowered since 202Q4; 2) fund-raising projects have been converted since June 2022, and fixed expenses such as depreciation have increased; 3) orders have declined due to declining industry sentiment. The company's profitability is under short-term pressure. The gross profit margin of 22Q1-22Q4 in a single quarter was 50.26%/44.97%/36.62%/29.40%, respectively, which gradually declined from month to month. The main reason was the decline in product demand in the second half of 2022, the decline in capacity utilization, and the rise in unit costs due to the rise in production capacity of 12-inch silicon wafers. In terms of expenses, the 23Q1 management fee rate, financial expense ratio and R&D expense ratio all continued to increase month-on-month. The R&D expenses in 2022 were 272 million yuan, an increase of 18.67% over the previous year. This was mainly due to the company's continuous increase in R&D investment in new products and technologies and the merger of Jiaxing Jin Ruihong. The R&D cost rate has increased quarterly since 22Q2. Affected by the international situation, macroeconomic policies, etc., combined with a decline in the number of orders in the second half of 2022, the company's inventory level was high, with an inventory of 1,337 billion yuan in 2022 and an inventory of 1,406 billion yuan in Q1 2023. With the gradual recovery of order volume in '23, the company's inventory is expected to fall to a healthy level.
Large-sized silicon wafers are progressing steadily, and the product structure continues to be optimized:
According to investor relations activity records, the company's silicon wafer products cover 6-12 inch semiconductor polishing sheets and silicon epitaxial sheets. Among them, the technical capabilities of 12 inch semiconductor silicon wafers have covered logic circuits and storage circuits for technology nodes above 14nm, as well as image sensor devices and power devices for technology nodes required by customers. In 2022, the company's semiconductor silicon business achieved revenue of 1,746 billion yuan, a year-on-year increase of 19.73%, a gross profit margin of 34.18%, and a year-on-year decrease of 11.27 pcts. The company's 12-inch silicon wafer sales scale continues to expand. Quzhou's silicon wafer production base with a capacity of 150,000 pieces/month is still climbing; Jiaxing Jinruihong's production capacity is progressing steadily, and it is expected that 150,000 wafers per month will be built by the end of March 2024. Domestic downstream semiconductor manufacturers of 12-inch silicon wafers are rapidly expanding production. As market demand continues to rise and the company's production capacity is gradually released, the large-scale effect is expected to drive the company to achieve a sharp rise in quantitative profits.
Power devices, photovoltaics and vehicle regulations go hand in hand, and the RF business has significant technical advantages:
The company's main semiconductor power device products are 6-inch Schottky chips, MOSFET chips, FRD chips and TVS chips. It achieved revenue of 1,078 million yuan in 2022, an increase of 7.10% over the previous year.
Benefiting from the rapid growth of clean energy and new energy vehicles, the number of orders has basically returned to the same period in 2022. The company's layout revolves around photovoltaics and automotive regulations. According to the annual report for '22, photovoltaic products grew rapidly, accounting for 45%-49% of global photovoltaic chip sales; grooved chip shipments increased year-on-year, an increase of 86%; demand for FRD products was strong and steady, with a year-on-year increase of 400%; IGBT product development went smoothly and entered the customer verification stage. Compound semiconductor RF chips achieved revenue of 501 million yuan in 2022, an increase of 14.90% over the previous year. At present, the RF business has realized the application of InGap HBT technology in 5G mobile terminals and WiFi wireless networks, developed the world's advanced dual 0.15 micron GaAs PhEMT process technology, and 3D lasers (VCSEL) filled many gaps in domestic technology; through IATF16949 vehicle specification quality system certification, batch shipments have been achieved.
Investment advice:
We expect the company's revenue from 2023 to 2025 to be 3.607 billion yuan, 4.439 billion yuan, and 4.712 billion yuan respectively, net profit of 746 million yuan, 948 million yuan, and 1.12 billion yuan respectively; EPS is 1.1 yuan, 1.4 yuan and 1.66 yuan respectively. The corresponding PE is 41 times, 32 times and 27 times respectively, maintaining the “Buy-A” investment rating, and the target price for 6 months is 61.54 yuan.
Risk warning: industry demand falls short of expectations; market competition risk; technology iteration risk.