Incident: The company released its annual report for 23 years, with revenue of 1,251 billion yuan, YoY +199.90%; net profit to mother - 46 million yuan, net profit not to mother - 113 million yuan, all reducing losses year on year; gross profit margin of main business 17.53%, YOY+18.24pcts. Looking at Q4 in a single quarter, revenue of 426 million yuan, YoY +188.66%, QoQ +10.12%, increased for 7 consecutive quarters; net profit to mother of 0.23 million yuan, YoY +138.92%, QoQ +492.61%; net profit without return to mother was 0.1 million yuan, which was positive in the first quarter since 21Q3.
Maintain high R&D investment, and scale effects drive R&D cost rates down. R&D expenses in '23 reached 137 million yuan, YoY +7.57%. Benefiting from a nearly two-fold year-on-year increase in revenue, the R&D expense ratio was reduced from 30.59% in '22 to 10.97%. The company successfully broke through the problems of high-quality SiC monocrystalline growth interface control and defect control. Profitability is expected to continue to increase as yield improves and cost rates stabilize in the future.
Production and sales have increased dramatically, and market share has steadily increased. The Shanghai Lingang Plant began product delivery in mid-'23. The original planned production capacity plan for 300,000 conductive substrates was realized ahead of schedule in 26, and the second phase of the production capacity increase plan will continue. The production and sales volume of SiC substrates in '23 were 26.20 and 226,300, respectively, up 268.25% and 254.73%, respectively. Among them, the market share of semi-insulating SiC substrates ranked in the top three in the world for 4 consecutive years; according to Fuji Economic Report data, the company's market share of conductive SiC substrates in 23 surpassed Coherent (Coherent) and became second in the world.
Batch products were introduced to internationally renowned customers, and the 8-inch substrate accelerated layout. 6-inch conductive substrates are supplied in large quantities to major international manufacturers: New long-term cooperation agreements were signed with Infineon, Bosch, etc. in '23 to provide 6-inch conductive substrates and crystal bars to Infineon, accounting for the double-digit level of Infineon's demand, which will help it transition to 8 inches. Currently, more than 50% of the world's top ten power semiconductor companies have become corporate customers. Furthermore, the company is the first in the industry to prepare an 8-inch substrate with low defects using the liquid phase method. It has now been sold in batches, and will gradually increase 8-inch production capacity according to downstream markets and customer conditions.
Profit forecast: The company's net profit for 24-26 is estimated to be 121, 3.25, and 524 million yuan, respectively, and the corresponding PE is 163.2, 60.7, and 37.6 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Yield improvement falls short of expectations, market demand falls short of expectations, production capacity construction is slower than expected, etc.