2023 forecast net profit to mother increased 50-70% year over year
The company issued a performance forecast: in 2023, net profit attributable to mother was 4385-4.970 billion yuan, +50-70% year-on-year; net profit after deducting non-return to mother was 41.20-4.705 billion yuan, +50.36% — 71.70% year-on-year. In line with market expectations. Looking at a single quarter, we calculated 4Q23 to achieve net profit of 882-1,456 million yuan, or -5%-+59% year-on-year; realized net profit without deduction of 881-1.405 billion yuan, or -1%-+69% year-on-year.
Key points of interest
“Equipment+materials” two-wheel drive, 23Q4 profit center +27%. Net profit for 4Q23 was 1.164 billion yuan, +27% year-on-year. By product, we judge that in the fourth quarter of '23, 1) in the equipment business, there were plenty of orders for monocrystalline furnaces, component equipment, silicon carbide epitaxial furnaces, etc.; 2) in the materials business, due to the decline in the overall operating rate of silicon wafers, the price of quartz crucibles was slightly reduced, and the price of diamond wire may also have declined; at the same time, silicon carbide substrates are in the early stages. We judge that R&D costs are still high.
Ongoing orders are plentiful, supporting 24-year performance. By the end of 3Q23, the company had not completed contracts for crystal growth equipment and intelligent processing equipment totaling 28.75 billion yuan. We expect ongoing orders in the fourth quarter may continue to grow, supporting 24-year performance growth. In January '24, according to Aixu's official account, Aixu ABC technology achieved an efficiency breakthrough of 27% + using the superconducting magnetic-controlled direct pull method (LD-MCZ). We believe that the company's superconducting magnetic field monocrystalline furnaces are leading the technological iteration in the industry. As the proportion of high-efficiency N-type batteries increases and enters a new round of replacement cycle for monocrystalline furnaces, the company's orders and deliveries for superconducting magnetic field monocrystalline furnaces are expected to maintain a good trend.
The pan-semiconductor layout deepened, and the silicon carbide business contributed to the company's new growth curve. The company continues to extend from photovoltaics to the semiconductor industry chain, focusing on third-generation semiconductor development opportunities. In November '23, the company signed a contract and held a launch ceremony for the “Project with an annual output of 250,000 6-inch and 50,000 8-inch silicon carbide substrates” in Shangyu. We expect the company's production capacity of silicon carbide substrates to be around 5,000 pieces/month by the end of '23, and is expected to exceed 20,000 pieces/month in 24/25. Currently, the company's 6-inch substrates have reached or are superior to the technical level in the industry in terms of diameter, microdensity, misalignment, resistivity, warpage, etc., and have been verified by many downstream companies and are in the rapid measurement stage; 8-inch substrates are in the small-batch trial production+downstream verification stage; at the same time, we judge that the company's orders for silicon carbide epitaxial furnaces have grown rapidly in 23, and are expected to be delivered and received in 24/25.
Profit forecasting and valuation
As the profitability of the materials business fell short of expectations, we lowered 2023/24 net profit 6.6%/5.6% to 4,692 billion yuan/5.937 billion yuan, and introduced net profit of 2025 of 7.626 billion yuan. The current stock price corresponds to 2024/25 8.7/6.8 times P/E. Maintaining an outperforming industry rating, the target price was lowered by 6% to 54 yuan, corresponding to 11.9/9.3 times P/E in 2024/25, with 36.3% upside compared to the current stock price.
risks
There is a risk of technology iteration, and the downstream production expansion progress is lower than expected.