Event: Company releases 2023 annual report

23 The full-year results were in line with expectations, and profitability continued to increase due to scale effects. 23 Throughout the year, the company achieved revenue of 1.25 billion yuan, YoY +200%, net profit to mother - 50 million yuan, YoY +74%; in 23Q4, the company achieved revenue of 430 million yuan, YoY +189%, net profit to mother of 0.2 billion yuan, and YoY +139%. Benefiting from the continuous penetration of silicon carbide in various applications in the field of new energy and the continuous increase in market size, the company has achieved high performance growth with technology, production capacity, and customer advantages as an international first-tier substrate manufacturer. 23Q4 gross profit margin was 17.8%, basically flat month-on-month, with a net interest rate of 5.3% to mother and +4.3pcts month-on-month. The scale effect is expected to drive continued improvement in profitability.

Overseas markets have been successfully developed in 23 years, and the global market share of conductive silicon carbide substrates has risen to the top three in the world.

In '23, the company's market share of conductive silicon carbide substrates rose to the top three in the world. Sales volume of silicon carbide substrates reached 226,000 sheets, an increase of 255%. Overseas markets developed smoothly. Domestic and overseas revenue of 670 million yuan and 410 million yuan respectively in '23, up 140% and 822%, with gross profit margins of 10.6% and 29.0%. The differences in domestic and foreign gross margins were mainly due to differences in product structure and competitive landscape.

1) On the technical side, 8-inch conductive substrates have been supplied in batches: Currently, SiC conductive substrates mass-produced by major manufacturers around the world are mainly PVT 6-inch products. The company is the second manufacturer in the world to announce the batch supply of 8-inch conductive silicon carbide substrates after Wolfspeed.

2) On the production capacity side, the annual production capacity of 960,000 sheets in Lingang will rise: The company has now formed production bases for silicon carbide semiconductor materials in Jinan, Shandong, Lingang, and Shandong. The Shanghai Lingang Plant began product delivery in '23, completed production capacity construction with an annual output of 300,000 conductive substrates. Tianyue, Shanghai achieved revenue of 400 million yuan in '23, and is continuing to advance the second phase of the production capacity increase plan.

3) Clients, speeding up overseas to major international manufacturers such as Infineon and Bosch: On the customer side, more than 50% of the world's top ten power semiconductor companies have become company customers. In 23, the company has signed new long-term cooperation agreements with Infineon, Bosch and other customers, accounting for the double-digit level of Infineon's conductive substrate and crystal rod requirements, and will help Infineon transform to 8-inch products.

Profit forecast and investment rating: New energy market sentiment is declining, and demand for cost reduction from car companies and photovoltaic inverter manufacturers is increasing. Based on this, we lowered our profit forecast for the company. The estimated revenue for 24-26 is 22.7/3.45.10 billion yuan (the previous 24-25 forecast value was 26.3/4.16 billion yuan), and the current market value corresponds to PS 8.9/5.9/4.0 times, respectively. We are optimistic about the accelerated penetration of silicon carbide into new energy scenarios and the company's scarcity as a leading domestic substrate, maintaining a “buy” rating.

Risk warning: risk of downstream demand falling short of expectations; risk of increasing production capacity and output falling short of expectations; risk of increased market competition; risk of technology iteration falling short of expectations; risk of high concentration of suppliers and customers.