Key points of investment

High-threshold markets continued to break through, and revenue bucked the trend. The downstream market was divided in 2023, and the consumer electronics market boom was relatively low. Shipments of some of the company's consumer products declined markedly, and prices also fell by a certain margin, putting some pressure on the company's sales and profit growth. The company increased its promotion efforts in large-scale high-threshold markets such as white electricity, communications, industry, new energy, and automobiles. Products such as analog circuits, IGBT devices, IPM intelligent power modules, PIM power modules, silicon carbide power modules, superjunction MOSFET devices, MCU circuits, compound chips and devices continued to be listed. The company's overall revenue increased by about 13% over the same period last year.

Insist on investment in R&D and accelerate the construction of platforms for automobiles and industrial products. The company continues to increase R&D investment in new products such as analog circuits, power devices, power modules, MEMS sensors, and silicon carbide MOSFETs, to accelerate the construction of automotive-grade and industrial-grade circuit and device chip process platforms, and increase R&D investment in automotive-grade power modules and new energy power modules. The company's R&D expenses increased by about 22% over the same period last year.

The capital increase in Silanminglium will consolidate the production capacity base for SiC main drive power modules to be launched. The company, Big Fund Phase II, and Haichuang Development Fund have all completed capital increases for Silanming Gallium. Currently, Silanming Gallium has a monthly production capacity of 3,000 6-inch SiC-MOSFET chips, and the current production capacity is full. Silamine Gallium is speeding up the purchase, installation and commissioning of project equipment, and is expected to have a monthly production capacity of 12,000 6-inch SiC chips by the end of 2024. Currently, Silanming's gallium SiC MOSFET's electric vehicle main drive power module has passed the quality certification of many domestic customers. It is comparable to the mass production level of major international manufacturers, and batch orders have begun to be delivered one after another.

Investment advice:

We expect the company's 2023-2025 net profit to be -0.4/2.9/4.7 billion yuan, maintaining a “buy” rating.

Risk warning:

Technology iteration risks; industry competition increases risks; market demand recovery falls short of expectations.