Incidents:
The company released its 2023 three-quarter report. The first three quarters achieved operating income of 10.156 billion yuan, a year-on-year increase of 1.43%, net profit of 173 million yuan, a year-on-year increase of -82.51%; operating income for the third quarter was 3.686 billion yuan, an increase of 13.43% year-on-year, and net profit of 0.3 billion yuan, a year-on-year increase of -95.19%.
The industry gradually picked up, and the company's operations increased month-on-month in the third quarter:
Since 2023, consumer demand in the LED terminal market has been sluggish, LED chip manufacturers are under pressure to reduce prices, and both revenue and profitability are under pressure. Since the second quarter, prices of some LED chip products have stabilized and become an upward trend, and the industry has gradually begun to pick up. In the long run, LED is used in a wide range of fields, and the LED market will gradually pick up as the overall economy recovers. According to TrendForce forecasts, the LED market output value is expected to grow to 21,113 billion US dollars in 2027, and the composite growth rate from 2022-2027 will reach 8%. In the radio frequency sector, the domestic semiconductor industry has entered a downward cycle since 2022Q3. The industry is generally in the stage of removing inventory. Since Q2 this year, along with the recovery in terminal demand, increased capacity utilization, and the gradual stabilization of prices, the industry has also shown a recovery trend. 23Q3's revenue side for the single quarter was $3.686 billion, up 13.43% year on year, up 3.48% month on month, and net profit was $03 million, reversing losses up from the second quarter.
Silicon carbide production capacity has climbed, and automotive-grade products have been shipped in batches:
As one of the few vertically integrated manufacturing platforms for the silicon carbide industry chain in China, Hunan San'an includes long crystal growth - substrate production - epitaxial growth - chip preparation - packaging testing. The semi-annual report revealed that during the reporting period, the silicon carbide production capacity was 15,000 pieces/month. The 6-inch silicon carbide substrate has been verified by several major international customers and has been shipped in batches. The production capacity for the next two years has been basically locked down, and the 8-inch substrate has been tested in small batches. The company's silicon carbide chip products have been widely used in fields with high reliability requirements such as photovoltaics, energy storage, and new energy vehicles. Among them, the cumulative shipment volume of silicon carbide diodes continues to lead the industry. The reliability data for the 650V 20A has reached 6000 hours. Fourth-generation high-performance products have been iteratively launched, and products that have passed vehicle certification are continuing to be shipped. SiC MOSFET 1200V and 1700V series products include 80mω/32mω/20mω/16mω/1Ω. The product's performance is industry-leading in terms of specific conduction resistance, breakdown voltage characteristics, and threshold voltage stability; 80mΩ products have been placed in batch orders for photovoltaic and vehicle charger clients; vehicle grade 1200V 16mΩ has been tested by several strategic customers. It is expected that mass production will be officially launched in 2024. The MOSFET foundry business has cooperated with leading new energy vehicles and supporting companies.
Investment advice:
Considering that the company is benefiting from the recovery of the LED and consumer electronics industry, and that the silicon carbide business is expected to expand, we expect the company's revenue from 2023 to 2025 to be 14.28 billion yuan, 16.565 billion yuan, and 21,534 billion yuan respectively, net profit of 293 million yuan, 1,721 billion yuan, and 2,801 billion yuan respectively. Net profit growth rates of 57.3%, 487.9%, and 62.8% respectively, giving a market-profit ratio of 55 times in 2024. Corresponding to the target price of 18.97 yuan within 12 months, maintaining “buy-A” ” Investment ratings.
Risk warning: downstream demand falls short of expectations; product development falls short of expectations; customer progress falls short of expectations.