San'an Optoelectronics: A global leader in optoelectronic displays, shining towards a major platform for compound semiconductors San'an Optoelectronics is a leading enterprise in China's compound semiconductor industry. It has focused on the development and manufacture of compound semiconductors in the optoelectronic field for many years. Since its inception, it has concentrated on the development and production of full-color ultra-bright LED epitaxial films and chips, laying a solid technical and market foundation in the field of compound materials and pan-semiconductor manufacturing. Since 2014, Sanan Optoelectronics has used its rich experience in the field of III-V compound semiconductors to gradually expand into the field of foundry services in the compound semiconductor manufacturing industry, expanding its business scope from original LED chips to various high-growth fields such as communication radio frequency, optical communication, and power electronics.
The dawn of the LED industry has arrived, and new applications bring a new future
The global economy is gradually picking up, and overall demand in the LED industry has rebounded. LED chip prices have gradually bottomed out in 2023Q4 after experiencing an improvement in the supply pattern, and the LED industry is expected to enter a repair channel in the future; at the same time, the new future brought about by new technology and applications centered on Mini/Micro LED and small-pitch displays is gradually approaching, and the LED industry is expected to achieve good structural growth. As a leading global LED chip company, Mini/Micro LED technology and business is expected to benefit deeply from the recovery of the industry.
Communications system upgrade+demand is picking up, and the RF business is dawning
Communication system upgrades and iterations in satellite communication technology drive the scale of gallium nitride RF applications. The economic recovery has spawned a bottom in mobile phone sales and an AI wave that may set off a new switching cycle. Demand for gallium arsenide RF and filters has increased markedly. The RF industry is in full swing, and domestic demand is on the rise. San'an Optoelectronics is a domestic core GaN RF and GaAs RF foundry. At the same time, Quanzhou San'an has IDM manufacturing capabilities for filters, and has deep basic capabilities for integrating and modulating RF devices. It can provide major domestic customers with complete RF device solution capabilities. In the future, it will accelerate high-quality growth with communication system upgrades and domestic substitution.
Silicon carbide is about to enter the car, and the growth explosion singularity is getting closer
Demand for high voltage in the new energy sector continues to grow, and the silicon carbide penetration rate is imminent. The market size is expected to remain high for a long time. At the same time, as industry cost reduction and vehicle certification accelerates, 2024 is expected to be the first year domestic silicon carbide chips are introduced, and industry singularities are imminent. Hunan San'an is one of the few companies in the world with integrated manufacturing capabilities for substrates, epitaxial, and chip processes. It has cooperated deeply with leading domestic NEV customers and Tier 1 manufacturers, and has also established a joint venture factory and wholly-owned supporting substrate base in Chongqing with ST, a leading global power device company. The strategy is already targeting the global market, and the forward-looking layout is gradually contributing to new vitality.
Optical chips are expected to increase rapidly in the data era, and the OEM market may open up. In the data age, the growth of the optoelectronic device market mainly comes from the expansion of the consumer electronics market and the extensive construction of data centers in the communications field. III-V compound semiconductor materials have direct transition energy band structures and high photoelectric conversion efficiency, and can now be used in mature LED and optical communication industries. San'an integrated optical technology chips cover laser light sources and light detection devices, and provide laser light source and light detection chip OEM services at various rates and wavelengths, including high-power VCSELs, high-speed VCSELs, DFB, EEL, and optical detection chips MPD, APD, PD, SPD, etc., and are hoping to take advantage of the AI & informatization wave.
Investment advice
We expect the company's revenue for 2023-2025 to be 141.14, 18.831, and 22.708 billion yuan, respectively, and net profit to mother of 3.35, 13.07, and 2,234 billion yuan, respectively. The corresponding PE is 196X, 50X, and 29X, giving it a “buy” rating.
Risk warning
1. Downstream demand for LEDs and semiconductors falls short of expectations;
2. Technical promotion and customer promotion of compound semiconductor products fell short of expectations.