Key points of investment:
The company is the leading domestic manufacturer of power semiconductors with a vertically integrated layout. The production capacity planning is reasonable, downstream demand is structurally improved, and it is expected to take the lead in marginal recovery.
The vertical integration layout of the industrial chain, the gradual release of 8-inch production capacity, the company integrates R&D, production and sales, and is committed to the vertical integration of industrial chains such as semiconductor silicon wafers, chip and device manufacturing, and integrated circuit packaging and testing. In the first half of 2023, semiconductor power devices/discrete device chips/semiconductor silicon wafers accounted for 85%/10%/3% of revenue, respectively. The company's products include various power devices such as power diodes, rectifier bridges, small signals, MOSFETs, IGBTs, SiC devices, etc., which can provide customers with a package of products, technology and service solutions. With the gradual release of the company's Chuwei Semiconductor 8-inch fab production capacity, the company's supply guarantee and cost control capabilities will be further enhanced.
Leveraging fields such as automobiles and photovoltaics, new products continue to break through
The company actively promotes product certification and mass production in emerging fields such as new energy vehicles and photovoltaic energy storage, and has completed the full 10A-200A development of 8-inch 1200V groove IGBTs, focusing on industrial control, photovoltaic inverters, and new energy vehicles. The HPD and DCM full silicon carbide main drive modules developed independently by the company have now received tests and cooperation intentions from many Tier 1 and terminal car companies, and plans to complete batch launch of mainly driven silicon carbide modules nationwide in 2025.
Dual brand operation at home and abroad opens up market space
The company has always adhered to the dual cycle model at home and abroad, and the recognition and purchasing power of overseas customers for the company's products continued to increase. The company operated the European and American markets under the “MCC” brand and the Chinese and Asia-Pacific markets under the “YJ” brand, accounting for about 31% of overseas revenue in 2022. A new development pattern of double circulation and mutual promotion between domestic and international markets has been formed. Overseas customer development will be one of the important strategic plans for the company's future development.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2023-2025 to be 55.92/65.81/7.68 billion yuan, respectively, with year-on-year growth rates of 3.50%/17.68%/16.71%; net profit to mother of 9.04/11.23/1.410 billion yuan, respectively, year-on-year growth rates of -14.77%/24.30%/25.57%; 3-year CAGR of 9.98% and EPS of 1.66/2.07/2.60 yuan respectively, corresponding PE is 25/20/16 times respectively. Given that the company is a leading domestic power semiconductor IDM enterprise, we gave the company 25 times PE in 24 years, with a target price of 51.71 yuan. For the first time, we gave it a “buy” rating.
Risk warning: Risks such as downstream demand recovery falling short of expectations, capacity construction falling short of expectations, and increased industry competition.