Incidents:
On April 11, Tianyue Advanced released its 2023 annual report. In 2023, it achieved revenue of 1,251 billion yuan, a year-on-year increase of 199.90%; net profit to mother - 46 million yuan, narrower than loss in 2022 by 130 million yuan; net profit after deducting non-return to mother - 113 million yuan, narrower than 2022 losses of 145.5 million yuan.
Looking at a single quarter, 2023Q4 achieved revenue of 426 million yuan, a year-on-year increase of 188.66% and a month-on-month increase of 10.12%; realized net profit of 0.23 million yuan, which turned a loss into a profit year-on-year, with a year-on-year increase of 492.61%; and realized net profit without return to mother of 0.1 million yuan, all of which turned a loss into a profit year-on-year.
Investment highlights:
Production capacity and output climbed rapidly, and profitability continued to improve. As of 2023Q4, the company has achieved seven consecutive quarters of revenue growth. In 2023Q3 and Q4, the company's single-quarter results turned year-on-year losses into profits, and net losses narrowed for the full year of 2023. In mid-2023, the company's Shanghai Lingang plant successfully began product delivery and achieved rapid production capacity climbing. The production capacity plan for 300,000 conductive substrates was achieved ahead of schedule in 2026, and the company will continue to push forward the second phase of the production capacity increase plan. In 2023, the company sold 226,300 silicon carbide substrates, an increase of 254.73% year-on-year.
Thanks to the company's large-scale stable supply capacity and the positive results of the company's long-term layout of core key technologies, the company's gross margin of substrate products continued to increase throughout the year.
Having been associated with leading international customers such as Infineon and Bosch for a long time, the global market share of conductive silicon carbide substrates rose to second place in the world in 2023. In 2023, the company continued to strengthen cooperation with domestic and foreign customers. By the end of 2023, more than 50% of the top ten global power semiconductor companies had become the company's cooperative customers. In 2023, the company signed long-term cooperation agreements with internationally renowned companies such as Infineon and Bosch. Among them, the company provides Infineon with 6-inch conductive substrates and crystal bars, which account for the double-digit level of Infineon's demand, while Tianyue will also help Infineon transform to 8-inch products. According to estimates from Fuji Economic Report, an authoritative industry research agency in Japan, Tianyue Advanced surpassed Coherent (Coherent) in the global conductive silicon carbide substrate material market in 2023, ranking second in the world.
R&D expenses continue to rise, leading the automotive-grade, 8-inch product industry. In 2023, the company spent 137 million yuan on R&D, an increase of 7.57% over the previous year. Continued growth in R&D expenses has helped the company's new products progress smoothly. In 2023, the company achieved a rapid strategic transformation, and automotive-grade conductive silicon carbide substrate products reached the leading level in the industry. The company's high-quality 6-inch conductive substrate products have been supplied in large quantities to leading international customers. At the same time, the company is leading the way in 8-inch conductive substrate product quality and batch supply capacity, driving leading customers to actively transition to 8-inch. The company will also gradually increase the production capacity of 8-inch products according to the customer situation in the downstream market. Additionally, in 2023, the company announced the completion of liquid phase preparation of an 8-inch conductive silicon carbide substrate, the first in the industry. At present, the performance and core indicators of the company's substrate products have reached leading domestic and international advanced levels.
Profit forecasting and investment rating As a leading domestic silicon carbide substrate company, the company is expected to continue to consolidate its market position and maintain steady growth with the advantages of technology, production capacity and clients. At the same time, with the gradual increase of new entrants to the third-generation semiconductor industry, industry competition may face increased risks. Therefore, we slightly lowered the company's profit forecast. We expect the company's revenue for 2024-2026 to be 24.61/34.39/4.414 billion yuan, respectively, and net profit from 2024-2026 to the mother of 1.73/3.24/505 million yuan, respectively. The 2024-2026 PS was 8/6/4 times, respectively. As a leading domestic silicon carbide enterprise, the company continues to maintain a leading position in high-end products and maintains a “buy” rating.
Risk warning 1) Demand in the new energy industry falls short of expectations 2) Increased competition in the SiC substrate industry 3) Risk of uncertainty in the domestic replacement process for large silicon carbide substrates 4) The company's production capacity release falls short of expectations 5) The company's technological breakthroughs fall short of expectations.