Company trends
The current situation of the company
On October 16, the company issued an announcement on the plan to increase the shares of the company by the subsidiary of the actual controller. China Resources Micro has received a letter from China Resources, the actual controller of the company, that, based on its confidence in the company's future development and recognition of the company's long-term investment value, it is planned that within 12 months from the date of disclosure of this announcement, the company's controlling shareholder, CRH (Microelectronics) Limited, will increase its holdings in a total amount of not less than RMB 100 million through the means allowed by the trading system of the Shanghai Stock Exchange (including, but not limited to, centralized bidding, block trading, etc.). We believe that the disclosure of this increase plan fully reflects the real controller's optimism about the company's management, development and future market.
Comment
One of the domestic IDM leaders, products and solutions plate and manufacturing and service plate double growth engine. The company is a leading mature process IDM in China. In the field of power semiconductors, the performance and technology of many of the company's products are in the leading position in China, the gap with foreign manufacturers is narrowing, and the process of localization is accelerating. The company's main products include power semiconductors represented by MOSFET, IGBT and the third generation wide band gap semiconductors, sensor products based on photoelectric sensors, smoke sensors and MEMS sensors, and intelligent control products represented by MCU. In the first half of 2023, the income was 5.03 billion yuan and the net profit was 778 million yuan, showing strong business resilience.
The strategy of "two rivers and three places" has been continuously promoted to create a multi-size and multi-category compound development curve. At present, the company has three major manufacturing bases in Wuxi, Chongqing and Shenzhen, among which Wuxi base is mainly composed of products of 8 inches and below, and the 12-inch production line of Chongqing base continues to expand. Shenzhen base products are diversified and geographically closer to the market and customers.
The semiconductor market is expected to achieve a sustained and modest recovery. 2H22-1H23, semiconductor downstream demand structure differentiation, weak consumer electronics demand, new energy power generation and automotive electronics applications demand to maintain a certain degree of resilience. However, with the release of 2H23 personal terminals such as mobile phones, AR/VR, smart homes and other new products, we believe that the semiconductor market is expected to usher in a sustained mild recovery with the gradual elimination of supply-side contradictions. According to the World Semiconductor Trade Statistics Organization (WSTS), the global semiconductor market will decline by 10.3% in 2023, reaching about US $515.1 billion, but is expected to grow by 11.8% to about US $576 billion in 2024.
Profit forecast and valuation
The profit forecast for 2023 and 2024 will remain unchanged, and the 24-year net profit of 23max is expected to be 1.995 billion RMB 2.655 billion respectively. The current share price corresponds to 3.1 times 2023 price-to-book ratio and 2.8 times 2024 market-to-book ratio. Maintain outperform industry rating and 66.59 yuan list price, corresponding to 4 times 2023 market net ratio and 3.6 times 2024 market net ratio, 29% upside compared with the current stock price.
Risk
Capacity growth falls short of expectations; downstream demand falls short of expectations; price competition; plans to increase holdings fall short of expectations.