Event: Shilan Wei released its Triple report in 2023. The company 2023Q1-3 realized revenue of 6.899 billion yuan, yoy+10.49%; return net profit of-189 million yuan, yoy-124.44%;2023Q1-3 comprehensive gross profit of 23.38%, year-on-year-6.52pct. Among them, the company 2023Q3 achieved revenue of 2.424 billion yuan in a single quarter, the net profit of yoy+17.68%, qoq+0.58%; was-148 million yuan, and the single-quarter gross profit of yoy-184.57% and qoq-41.91%; was 21.87%.

Income is growing steadily, and profits are under short-term pressure from changes in fair value. Revenue side: 2023Q3 increased the promotion of analog circuits, IGBT devices, super-junction MOSFET devices and other products in large-scale white power, communications, industrial and other high threshold markets, and achieved steady revenue growth. according to company statistics, about 70% of the company's circuit and device revenue in the first three quarters of 2023 came from high threshold markets. On the profit side, due to the decline in the stock price of some of the non-current financial assets held by the company, the net income after tax generated by the change in fair value is about 182 million, resulting in short-term pressure on the profit side of the company.

The 8-hour line maintained full production, while the 12-year line adjusted capacity utilization in a short period of time. In terms of production capacity: the capacity utilization of 2023Q3's 5 and 6 'lines has rebounded to around 90%, while the 8' lines maintain full-load production; the capacity utilization of Silan core LED chips is close to full production, and the capacity utilization rate of Silan gallium LED chips is more than 90%; due to the adjustment of its own product structure, the utilization rate of 12 'production capacity of Shilanjike has dropped to around 70%, and the company expects 2023Q4 to pick up somewhat. In terms of gross profit margin: due to the intensification of market competition, the decline in the prices of some products has led to the pressure on the company's gross profit margin. At the same time, with the company increasing the promotion of the high threshold market and the improvement of costs, the company expects the company's gross profit margin to stabilize and gradually improve since 2023Q4.

It is proposed to raise $6.5 billion to improve IDM deployment. The company intends to raise no more than 6.5 billion yuan by issuing stocks to specific objects, which are mainly used for: annual production of 360000 pieces of 12-inch chip production line project (3 billion), SiC power device production line construction project (750 million), automotive semiconductor packaging project (1.1 billion), supplementary liquidity (1.65 billion). Among them, 360000 12-inch projects will increase the production capacity of 120000 FS-IGBT power chips per year, 120000 T-DPMOSFET power chips per year and 120,000 SGT-MOSFET power chips per year.

Profit forecast and investment advice: we expect the company's 2023E/2024E/2025E to achieve operating income of 115.2 billion yuan, yoy 14.1%, 21.9% and 23.2%, respectively, and its home net profit of-2.1, 8.4, and 510.9%, respectively, of 1.15 billion and 37.0%, respectively. 2024E/2025E downgraded to "recommended" rating corresponding to the current share price PE of 39.8Universe 29.0x.

Risk hints: downstream demand is lower than expected, market competition is intensified, and new capacity construction is not as expected.