Event Overview:

[2023]

Achieved annual operating income of 9.34 billion yuan, YoY +12.8%; net profit to mother - 40 million yuan, a loss of 1.05 billion yuan compared with 1.05 billion yuan in '22; net profit after deducting non-return of 60 million yuan, YoY -90.7%. The decline after deducting non-net profit was mainly due to the relatively low sentiment in the downstream general consumer electronics market and increased price competition in the LED chip market, putting pressure on performance; in 2023, the loss due to changes in the fair value of the financial assets held by the company was 520 million yuan, with a loss of 520 million yuan. At 290 million yuan, the income tax impact contributed 70 million yuan in positive profits, received 40 million yuan in government subsidies, and non-operating income and expenses contributed 0.2 billion yuan to profit. 2023 gross margin was 22.2%, YOY-7.2pcts; net non-net interest rate 0.6%, YOY-7.0pcts.

[23Q4]

The company achieved revenue of 2.44 billion yuan, YoY +19.8%, QoQ +0.7%; net profit to mother of 150 million yuan, YoY -44.8%, turning a loss of -150 million yuan compared to 23Q3; deducting non-net profit of -130 million yuan, 22Q4 was -0.4 billion yuan, and non-operating profit and loss of 23Q4 was 280 million yuan, mainly due to net investment income of 350 million yuan for the quarter (of which Silaminggallium combined with investment income of 290 million yuan in the fourth quarter); gross profit margin, YOY-9.2pcts, QoQ-3.0pcts; deducted non-net interest rate -5.1%, YOY-3.2pcts, QoQ-6.0pcts; 23Q4 inventory turnover days was 168.6 days, an increase of 3.7 days from 164.9 days in 23Q3.

Revenue grew steadily in '23, and the decline in prosperity put pressure on the company's profits. The main reasons for the decline in the company's profit level in '23 were: 1) The consumer electronics boom was low. The downstream consumer electronics boom is relatively low. Shipments of some of the company's consumer products have declined markedly, and prices have also fallen, putting pressure on both revenue and profits. 2) Low capacity utilization. Due to the slowdown in downstream market demand, the capacity utilization rate of Silan's integrated 5 inch and 6 inch lines declined, putting pressure on business performance. 3) LED chip market price competition intensifies. The price of the company's LED chips fell by 10%-15% compared to the end of last year, causing the operating losses of the holding subsidiary Silan Mingxin to expand further compared to the previous year.

High-end markets and high-end customers continue to break through

In '23, the company's products such as superjunction MOSFETs, IGBT devices, and IGBT high-power modules (PIM) grew rapidly, and progress was made in the development of IGBT and SiC products. Automobiles: 1) Electric vehicle main motor drive modules based on V-generation IGBT and FRD chips independently developed by the company have been supplied in batches to many domestic and foreign customers. 2) On the SiC side, the company has completed the development of the third-generation plane-grid SiC-MOSFET technology; the electric vehicle main motor drive module produced based on the second-generation SiC-MOSFET chip independently developed by the company has passed some customer tests and began mass production and delivery in 24Q1. It is estimated that sales of silicon carbide PIM modules used in automobile main drives will reach 1 billion yuan throughout the year; at the same time, the company has launched a hybrid parallel drive scheme for SiC and IGBT. Photovoltaic/energy storage: MCU products continue to make progress in fields such as photovoltaic inverters, and MOSFET/IGBT products are also opening up space in the photovoltaic market. Home appliances/industry: IPM modules continue to penetrate various inverter products from home appliances/industrial customers. In 23 years, many mainstream domestic white electric machine manufacturers have used more than 100 million Silan IPM modules in white electric appliances such as inverter air conditioners, an increase of 38% over the same period last year.

Multiple production lines go hand in hand, product structure continues to be upgraded

5/6/8 inch chips: In 23 years, the company produced a total of 2,217 million 5/6 inch chips (Silan integrated), YoY -6.9%, 8-inch chips (Shilan Jixin) 678,000 chips (56,000 pieces per month), YoY +4.3%. Epitaxial films: Chengdu Silan 5/6/8 inch epitaxial films are running steadily. The company increased investment in 12-inch epitaxial films in '23. By the end of '23, it had completed an investment of 110 million yuan, and the project progress was 38%. Packaging (Chengdu Jijia): The company already has packaging capacity for products such as 210 million power modules per year, 1.2 billion power devices per year, and 18 million automotive LED bulbs. In 2024, Chengdu Jijia will further increase investment in IPM power module packaging lines and expand its production capacity. 12-inch cable (Silan Jike): In 2023, Silan Jike's 12-inch line produced a total of 464,000 chips, a decrease of 1.3% over the same period last year. In 2012, Silanji Technology will accelerate the release of production capacity for automotive-grade IGBTs, MOSFETs, etc., and increase investment in the construction of automotive-grade analog integrated circuit chip process platforms to improve profit levels. Compound semiconductors: 23Q4 has developed a monthly production capacity of 6000 6-inch SiC MOS chips, and is expected to produce 12000 6-inch SiC MOS chips per month by the end of '24.

Investment advice

Given that the downturn in the industry continued to exceed expectations, and that the company's net profit was greatly affected by changes in the fair value of financial assets, we forecast the company's net profit to mother of 3.1/5.2 billion yuan in 2024/25/26 (previously estimated net profit to mother of 15.4/1.79 billion yuan for 24-25), corresponding PE of 101/60/45 times, maintaining a “buy” rating.

Risk warning

The industry boom falls short of expectations, R&D progress falls short of expectations, customer development falls short of expectations, and the risk of untimely updates of research and usage data.