Event: On January 26, 2024, the company released the 2023 annual results forecast. Net profit due to mother is expected to be 168 million yuan to 210 million yuan in 2023, a year-on-year decrease of 48.31% to 38.16%; net profit without return to mother is -180 million yuan to -140 million yuan, a decrease of 295 million to 259 million yuan compared with the same period last year.
The terminal market continued to weaken, and the cost of production expansion projects dragged down performance. The company's business performance declined sharply compared to 2022. The main reason for the year-on-year change in business performance in 2023 is: 1) According to SEMI statistics, the global economic growth rate continued to slow in 2023. The semiconductor industry was affected by weak terminal markets and macroeconomic conditions. Global semiconductor silicon wafer shipments fell 14.3% compared to 2022. Affected by this, the company's semiconductor silicon revenue decreased by about 12% year on year. 2) The company promoted a number of production expansion projects in 2023, including high-end silicon wafers and semiconductor specialty silicon wafers. Among them, the 300mm high-end silicon wafer project released a new production capacity of 150,000 wafers/month at the end of 2023, with a total production capacity of 450,000 wafers per month. Upfront costs and fixed costs in the production expansion process will have a significant impact on the company's operating performance during the reporting period.
Production of 300mm large silicon wafers continues to expand, and the 200mm specialty silicon wafer project is progressing steadily. In terms of 300mm large silicon wafers, the company continues to increase investment. As of the first half of 2023, the cumulative historical shipment volume of the 300mm semiconductor silicon wafer production capacity construction project being implemented by Shanghai Xinsheng has exceeded 8 million wafers.
Among them, the 300mm high-end silicon wafer production expansion project for integrated circuits has released a new production capacity of 150,000 wafers/month by the end of 2023. The total production capacity has reached 450,000 wafers/month, and production capacity is expected to increase almost one step in the future. On December 30, 2023, Shanghai Xinsheng plans to cooperate with the government and the Development Zone Management Committee to invest in the construction of a “300mm semiconductor silicon wafer drawing and cutting and polishing production base”, with a total planned investment of 9.1 billion yuan. The move is conducive to further increasing the company's market share and expanding its advantages in order to consolidate its leading position in the country. In terms of 200mm business, the company increased investment to support the expansion of project production. On January 27, 2024, the company announced an adjustment to the total investment amount of OkMetic's 200mm semiconductor specialty silicon wafer production expansion project, and adjusted the total estimated investment of 2.95 billion yuan to 2.99 billion yuan. After completion, it will form an annual production capacity of 3.32 million 200mm semiconductor polishing sheets.
After the completion of this adjustment project, it will help increase the company's market share and consolidate its competitive advantage in segments such as 5G, automotive electronics, and the Internet of Things (IoT).
Global silicon wafer shipments will rebound in 2024, and a recovery in silicon wafers can be expected. According to SEMI statistics, global silicon wafer shipments are expected to drop 14% in 2023 due to continued weakness in semiconductor demand and macroeconomic conditions. However, as applications such as artificial intelligence (AI), high-performance computing (HPC), 5G, automotive, and industry drive the increase in demand for silicon chips, global silicon wafer shipments are expected to rebound 8.5% in 2024 to reach 13.578 billion square inches. This rebound will continue until 2026, and shipments are expected to exceed 162 billion square inches.
Investment advice: Considering that the company is a leading company in domestic semiconductor silicon wafers, production capacity continues to expand, and profitability will gradually improve during the cycle recovery. It is expected to achieve net profit of 1.84/3.60/510 billion yuan in 23/24/25, corresponding to the current stock price PE of 234/120/84 times, respectively, maintaining the “recommended” rating.
Risk warning: Production capacity growth falls short of expectations; customer demand falls short of expectations; market competition intensifies.