Incidents:
On January 24, Jingsheng Co., Ltd. announced its 2023 annual results forecast. In 2023, the company achieved net profit of 68-78 million yuan, a year-on-year increase of 96.90%-125.85%; of these, net profit to mother was about 2460-34.6 million yuan in the fourth quarter, an increase of 59.93% to 124.96% over the previous year. The company achieved net profit of 41-49 million yuan after deduction in 2023, an increase of 80.52% to 115.74% over the previous year; of these, net profit without deduction for the fourth quarter was about 1431-2 231 million yuan, an increase of 20.76%-88.25% over the previous year.
Comment:
Silicon carbide models were released at an accelerated pace in 24, enjoying the dividend of a 10-fold increase in substrate production capacity. The company is a leading domestic silicon carbide long crystal furnace. The products have entered downstream core customers such as Sanan Optoelectronics, BYD Semiconductor, Tony Electronics, and Tianyue Advanced. Since the beginning of 2024, 800V silicon carbide models such as the Huawei Smart Choice S7, Genjie M9, and Xiaomi Auto have been intensively released. It is expected that the penetration rate of silicon carbide in new energy electric vehicles will double in 2024. Domestic silicon carbide substrates are expected to reach 5 million sheets in 2026, which is 10 times the domestic production capacity of silicon carbide substrates in 2022, and the company will fully benefit from the dividends of expanding silicon carbide production.
Responding positively to customized demand, the share of long crystal furnaces continues to increase. Currently, substrate manufacturers have uneven yields. Substrate manufacturers have outstanding DIY demand for temperature, heat fields, etc. in order to improve yield and reduce costs. Unlike competitors' standard product strategies, the company responds positively to downstream customized demand to improve yield. The share is expected to increase from 20% to 40%, with strong α. Furthermore, with the rapid growth of the company's revenue and the release of scale effects, it will effectively dilute fixed costs such as R&D expenses and fixed asset investment, and help increase profit margins.
Expand fields such as epitaxial furnaces and cutting equipment vertically to further open up room for growth. In order to further improve the layout of silicon carbide production equipment, the company vertically extended silicon carbide epitaxial growth and crystal processing equipment, and vigorously developed multi-wire cutting machine equipment and multi-disc CVD equipment. Currently, it is progressing smoothly. After successful development, it is expected that it will be quickly introduced with existing customer advantages to increase the value share in a single customer, which is expected to further open up the company's growth space.
Profit forecast and investment rating: We expect net profit to be 0.73/1.51/251 million yuan in 2023/2024/2025, corresponding PE of 73/35/21 times. Considering that the company is expected to enter a period of rapid expansion in the next 3 years, we give it a “buy” rating.
Risk warning: downstream demand falls short of expectations, industry competition intensifies, technology path changes