Yangjie Technology is a leading IDM manufacturer of discrete devices. The 2018-2022 revenue and net profit CAGR both exceeded 30%. Since its establishment in 2006, the company has taken root in diodes and continuously expanded its product categories, forming three major product tiers: traditional diode products (H1), small signal, MOSFET products (H2), IGBT, SiC, etc. (H3). The company's industrial chain is integrated. The wafer covers 4-, 5-, 6- and 8-inch chip production lines, and uses IDM+Fabless parallel mode in MOSFET, IGBT, SiC, etc.
Yangjie Technology's diode market ranks second in the world, entering high-end applications such as automobiles. Currently, the company has the largest market share of power diodes in China and second in the world; rectifier bridges and photovoltaic bypass diodes both rank first in the world. Benefiting from domestic alternative catalysis in the stock+incremental market, the company's diode business growth rate is expected to be higher than the industry average. 1) Stock replacement: With the gradual withdrawal of major overseas manufacturers, the company's global market share ranking rose from 4th in 2019 to 2nd in the world. 2) Incremental market: The high-end diode market has a lot of room for penetration. According to GIR data, global automotive-grade diode revenue reached US$492 million in 2021, expected to reach US$81 million in 2028, and a CAGR of 7.4% in 2028.
Short-term recovery: Overseas inventory removal is nearing its end, and growth is expected to resume in 2024. The company's small signal and MOSFET products are the main players overseas. It is expected that with the recovery of overseas markets, the growth rate of H2 series products can be expected. As of 1H23, there are 12 international marketing and technical outlets outside the company, including the United States, South Korea, Japan, India, and Singapore. Looking at the medium to long term: The product structure continues to be optimized, and there is strong certainty about growth in the NEV sector. The company's in-depth layout of automotive electronics has been recognized by many domestic and foreign auto parts companies. As of 1H23, PSBD chips and PMBD chips have been used in large quantities in the field of new energy vehicles and IGBT's revenue has exceeded 50% year-on-year.
Long-term strategy: global layout, building international market capabilities. In 2022, Yangjie Technology's overseas revenue accounted for 30.9%. 1) Yangjie Technology adheres to the “5050” strategy and will each account for 50% of domestic and foreign revenue in the future. Implement a “dual brand” strategy. The “YJ” brand focuses on the domestic and Asia-Pacific markets, and the “MCC” brand focuses on the European and American markets, achieving global channel coverage for both brands. 2) 1H23, the company issued GDR to raise capital to invest in the establishment of a subsidiary, Meiweike (Vietnam) Co., Ltd. in Vietnam to build a packaging testing production line in Southeast Asian countries.
Cautious production expansion strategy, the quality of operation is at the forefront of the industry. In recent years, the company has carefully expanded production. Currently, the operating rate of 4- and 5-inch lines continues to improve. The operating rate of 6-inch lines is over 90%, and 8-inch lines are fully produced. ROE increased significantly in 2020-2022.
Investment analysis opinion: First coverage, giving the company a “buy” rating. The forecast revenue for 2023-2025 is 56.7 billion yuan, 7.8 billion yuan, and net profit to mother of 9.2, 1.08 billion yuan, and 1.28 billion yuan. Referring to the 2024 average PE valuation of comparable companies, Yangjie Technology was given 25X PE. Compared with the current market value, there is room for growth of 24%, and the company was given a “buy” rating.
Risk warning: 1. Market competition risk; 2. Technical risk; 3. M&A risk.