Summary:

The power semiconductor market continues to grow, and new applications open up room for growth. The rapid growth of application markets such as LEDs, new energy vehicles, and wearable devices is driving the development of emerging product segments such as MOSFETs and IGBTs.

The company has several 4-inch, 5-inch, and 6-inch power semiconductor wafer production lines. With a production capacity of 3.3 million wafers of all sizes and 2.4 billion packaging resources per year, it is in a leading position in the domestic industry. The company's high-end products gradually began to be released in 2016. Replacing imports with high-end products will open up room for the company to grow.

Wide-bandgap power semiconductor discrete devices such as silicon carbide and gallium nitride have a wide range of applications and are irreplaceable. HuaWei Electronics is actively promoting the development and manufacture of third-generation new material devices. Relying on the company's many years of technical accumulation in power devices, we have developed new materials and devices that meet high-voltage and high-frequency working environments.

The company ended the stagnant performance situation from 2013 to 2016 and entered a stage of rapid performance growth. The reduction in the company's management expense ratio, financial expense ratio, and sales expense ratio has increased the company's profitability.

Profit forecast: We forecast the company's revenue for 2018-2020 to be 1,82, 22.4, 2.96 billion yuan, and net profit attributable to shareholders of the parent company to be 1.29, 183, and 239 million yuan. The corresponding EPS is 0.17, 0.24, and 0.32 yuan respectively. Give it an “increase in holdings” rating.

Risk warning: 1) The prosperity of the semiconductor discrete device industry is declining; 2) the development and industrialization of the high-end product IGBT falls short of expectations.