Main points of investment:
The total revenue in the first three quarters of 2023 was 119 million yuan, down 69.5% from the same period last year, and the net profit was-41.2049 million yuan,-130.5% compared with the same period last year. Due to the lack of demand for silicon materials and the impact of new wafer products in the initial stage of market expansion, the gross profit margin in the first three quarters is 27%. 2023Q3's performance was lower than expected, mainly due to the later than expected semiconductor cycle repair in 2023.
Expand production and consolidate the position of semiconductor etched silicon materials industry. Shengong Co., Ltd. mainly uses monocrystalline silicon materials for etching equipment upper and lower electrodes and outer rings, etc., with a market size of about $400 million to $500 million and a market size of $1 billion to $1.5 billion for silicon electrodes.
Shengong core team has more than 20 years of overseas experience, the company's magnetic field-free large diameter monocrystalline silicon manufacturing technology, solid-liquid coexistence interface control technology, thermal field size optimization technology and other technologies have been in the international advanced level. In 2021, the proportion of products with large diameter silicon more than 16 inches increased from 27.71% in 2021 to 28.95% in 2022. In January 2023, the production capacity of silicon materials reached about 500t / year, an increase of 10%. It is easy to raise 300 million yuan to expand the production of silicon materials, which will form an additional annual production capacity of 393tons (equivalent to 1145710mm) of silicon materials for etching.
In the silicon parts plate, accelerate the localization of the matching 12-inch etching machine. In 2021, the company established Quanzhou Jinzhou north-south parts factory, with the supporting capacity of the whole industry chain from etched silicon materials to silicon electrodes, 12-inch plasma etching machine parts, which has achieved small batch supply; in 2022, the company developed high-precision equipment for chemical mechanical polishing (CMP), and polycrystalline silicon structure products over 22 inches have passed a customer evaluation and achieved stable supply.
The income of semiconductor silicon wafers has reached 10 million yuan. The IPO investment project will increase the annual output of 1.8 million 8-inch semiconductor polishing wafers and 360,000 semiconductor companion wafers. A production line of 50,000 wafers per month has been built, and 100,000 wafers / month ordered in the second phase are coming in one after another; 8-inch test wafers are officially supplied to Japanese customers, and 8-inch wafers with low defects and high resistivity wafers are progressing smoothly in client evaluation.
The proportion of domestic customers has increased. As the global manufacturers of etching machines and etching silicon electrodes are located in Japan, Korea and the United States, the main customers of Shengong include Mitsubishi Materials, SK Chemistry, CoorsTek, Hana and other international enterprises. The share of domestic revenue rose from 1.9% in 2019 to 13% in 2022.
Downgrade earnings forecast and maintain "buy" rating. Due to the fact that the silicon material link of the company lags behind the semiconductor cycle by about half a year, the home net profit forecast for 2023-24 is reduced from RMB 1.53 billion to-0.15 pm. 2024PE48X, lower than the semiconductor material plate average 2024PE of 62X, the company's 2023 performance is greatly affected by semiconductor cycle fluctuations, optimistic about the company's long-term development in silicon materials and parts, maintaining the "buy" rating.
Risk tips: semiconductor business cycle downward, the yield of new products climb less than expected, shareholder reduction caused stock price changes.