Main points of investment:

The new energy industry drives the rapid growth of the IGBT industry, but the global market share is mainly occupied by overseas enterprises, the localization rate is less than 35%, and there is huge room for the development of domestic enterprises. According to yole data, the total size of global IGBT is about US $5.4 billion in 2020 and is expected to reach US $8.4 billion by 2026, with a CAGR of about 7.5%. New energy vehicles are the industry with the fastest compound growth in downstream applications, with a CAGR of about 22.26% in 6 years. Secondly, the rapid growth of photovoltaic wind energy storage energy storage also drives the long-term growth of IGBT demand. According to Omdia, overseas TOP3 companies such as Infineon, Fuji Electric and Mitsubishi account for more than 50 per cent of the market. Judging from the revenue scale of Acer and Micro Technology in 2022, IGBT modules account for less than 3% of the world, and there is still nearly 10 times more space than the international giants.

Independent research and development of IGBT, FRED chip iteration to the seventh generation, silicon carbide diode small batch supply, product applications continue to go deep into the photovoltaic, new energy vehicle market. At present, the company's IGBT chip iteration to the seventh generation, part of the product performance comparable to the international giants, in the first half of 2023 has achieved 25A small batch delivery, completed 150A, 200A expansion, and 12-inch 1700V IGBT chip has been completed development and verification; vehicle 750V 12-inch chip development; SiC diode research and development success and achieve small batch supply. In the field of industrial control, customers include Delta Group, Huichuan Technology, Inviton, etc.; in new energy power generation, there are A Company; in electric vehicles, there are BYD, Huichuan, Zhenchuan Technology, etc.; charging pile customers have Yingfeiyuan, Inkeri, excellent green energy, special calls and so on.

The company's production capacity is actively planned and layout, and the medium-and long-term performance growth is expected. The company currently has two factories: 1) Huashan plant (old plant): planned capacity of 4.5 million yuan / year; 2) Hsinchu plant phase I: planned capacity of 4.8 million yuan / year, capacity utilization rate of 20% in 2022, expected to increase to 60% in 2023, full production in 2024; Hsinchu plant phase II: annual capacity planning of 5.4 million yuan / year, three production lines are expected to be put into trial operation in 2023, and capacity is expected to be released in 2024-2025. In addition, the delivery capacity of the subsidiary core kinetic energy project is planned to put into production of 1.2 million automotive regulation products in the first phase, which will be put into production and delivery in the second half of 2023, which may become a supply point for the company's additional capacity in the future, which is also an important driving force for the company's performance growth.

Cover for the first time, giving a "buy" rating. At present, the localization rate of IGBT in China is less than 35%, and domestic demand benefits from high-speed growth driven by new energy vehicles and photovoltaic wind power storage. As one of the leading domestic IGBT enterprises, the company has profound technology accumulation, products continue to go deep into the new energy market, high production capacity planning and high growth, and the company's short-term performance is growing rapidly, and long-term development is expected. We estimate that the EPS of the company from 2023 to 2025 is 1.02 pessim2.36 yuan, respectively, and the PE corresponding to the current market capitalization is 50.22 pesque 31.48amp21.64, which we assign a "buy" rating.

Risk tips: capacity expansion is less than expected; upstream foundry continues to rise prices; industry cycle affects prices to fall.