Incident: The company released its 2020 semi-annual report. The company achieved revenue of 357 million yuan in 2020H1, an increase of 55.26% over the previous year; it achieved net profit of 6.0471 million yuan, an increase of 173.34% over the previous year. Among them, Q2 achieved revenue of 195 million yuan, an increase of 53.54% over the previous year; the net profit returned to the mother was 4,817,500 yuan, and last year Q2 lost 9.1381 million yuan.
Sales of infrared, photovoltaic, and semiconductor materials increased. 1) The company's 2020H1 revenue increased 55.26% year on year, mainly due to: ① Trade revenue increased by 521479 million yuan. Trade revenue in the first half of the year was 87.915,200 yuan, an increase of 145.80% over the previous year. ② Increased sales of major products. Sales of infrared grade germanium products increased 21.58% year on year, sales of photovoltaic grade germanium products increased 621.01% year on year, and sales of semiconductor materials increased 110.55% year on year. Due to the increase in product sales, the total operating income increased by 62.035 million yuan. ③ Prices of some products have risen. The price of photovoltaic-grade germanium products increased 4.19% year on year, and the price of semiconductor material products increased 184.03% (the main reason was that the product variety specifications were gradually changing from the original LED grade to the wrong and semi-insulating grade); while the price of material-grade germanium products fell 10.89% year on year, and the price of fiber-grade germanium products fell 19.25% year on year. 2) By product, the revenue of infrared grade germanium products in the current period increased 47.47% year on year, and the operating cost increased 24.26% year on year. The main reason was that due to the influence of comprehensive factors at home and abroad, market demand increased and sales increased, leading to a year-on-year increase in revenue in the current period; the operating income of photovoltaic grade germanium products increased 651.23% year on year, and operating costs increased 438.56% year on year. The main reason is that sales revenue of semiconductor material grade products increased 496.86% year on year, and operating costs increased 224.31% year on year This is due to the increase in sales of gallium arsenide and indium phosphate products in this period.
The company has sufficient production capacity for semiconductor-grade gallium arsenide and indium phosphate products. The company produced 103,700 non-germanium semiconductor material-grade products in the first half of the year (calculated as 4 inches), a growth rate of 148.68% over the same period last year; both sales volume and gross margin increased significantly. The company currently has a production capacity of 800,000 gallium arsenide wafers per year (equivalent to 4 inches); the current production capacity of indium phosphate single wafers is 50,000 pieces/year (2 inches). After the completion of the “indium phosphate single chip construction project”, the production capacity of indium phosphate single wafers can be increased to 150,000 pieces/year (4 inches). Sufficient substrate production capacity is expected to help increase sales of semiconductor-grade products significantly.
Profit forecasts and investment recommendations. We expect the company's net profit to be 0.15, 0.28, and 501 million yuan respectively; EPS is 0.02, 0.04, and 0.08 yuan respectively. The corresponding P/E of the stock price on August 24, 2020 was 627X, 348X, and 188X, covering the first “holding” rating.
Risk warning: The risk that demand for semiconductor products falls short of expectations and that new project construction falls short of expectations.