Investment logic:
The company's core products are diode rectifier bridges, small signals, MOSFETs, IGBTs, and SiC. The company uses vertical integration (IDM) integration and Fabless parallel business models, integrating R&D, production and sales. The wafer sector has 4/5/6/8 inch production lines. In 2015, it acquired 100% of MCC's shares to enter overseas markets, leading the international layout industry. Product strength drove revenue CAGR 39% from 2019 to 2022, net profit CAGR 68%, industry sentiment declined from 1 to 3Q23, company revenue yoy -9%; net profit to mother yoy -33%.
Flexible production capacity layout, high-end product transformation, and price bottoming back are expected to drive volume and price increases sharply in the future. While ensuring the operating rate of the existing 4/5/6 inch line, the company has steadily increased its 8-inch line production capacity and made full use of the external Fab plant as a capacity reservoir to actively build a more flexible and flexible production capacity system. According to Jibang Compound Semiconductors, the company leads the world in terms of market share of diodes. Companies in the middle and lower end markets are expected to continue to accept the share of large European and American manufacturers leaving. Furthermore, the company continues to enrich its product line, expand highly reliable and energy-efficient automotive modules and SiC products, and continue to transition to high-end. The price of power device products has bottomed out, and some 1M24 MOSFET manufacturers have begun to send price increase letters to customers. We believe that if product prices rise in the future, it will also benefit IDM companies first.
YJ+MCC dual brand layout, active overseas. 1) Dual brand strategy. YJ focuses on domestic and Asia-Pacific markets, and MCC focuses on European and American markets. Currently, the company has 20 domestic technical service stations including Shanghai, Beijing, and Guangzhou, and 12 international marketing and technical outlets overseas, including the United States and Singapore, to achieve global customer coverage. 2) 4M23 issued 14,339,500 GDR shares corresponding to 28,679,000 additional domestic basic A-shares. The issuance price of each GDR share of A-shares corresponding to the GDR was about 52.5 yuan, and the total amount of capital raised was about US$215 million. The capital raised is mainly invested in Vietnam to invest in the establishment of subsidiary companies, the establishment of sealed production lines in Southeast Asia, and the expansion of overseas channels.
Profit forecasts, valuations, and ratings
The company is forecast to achieve revenue of 55.97/67.84/8.08 billion yuan in 23-25 years, +3.57%/+21.23%/+18.03% year-on-year, net profit of 9.16/10.49/1,368 billion yuan, -13.58%/+14.50%/+30.37% year-on-year, corresponding EPS of 1.69/1.94/2.53 yuan.
Considering that the company's collaborative development at home and abroad has opened up a growth ceiling, the IDM+Fabless layout has a significant cost advantage. It was given 28xPE in 2024, corresponding to a target price of 54.32 yuan/share, covering the first time and giving it a “buy” rating.
Risk warning
The recovery in industry demand fell short of expectations; market competition intensified; exchange rate fluctuations; production capacity investment fell short of expectations; and the ban on restricted stocks was lifted.