Incidents:
On April 25, 2024, China Resources Micro released its 2023 annual report and 2024Q1 quarterly report: in 2023, the company achieved operating income of 1,901 billion yuan, a year-on-year decrease of 1.59%; gross profit margin of 32.22%; net profit to mother of 1,479 billion yuan, a year-on-year decrease of 43.48%; net profit without return to mother was 1,127 billion yuan, a year-on-year decrease of 49.97%.
On a quarterly basis, 2023Q4 achieved revenue of 2,371 billion yuan, a year-on-year decrease of 2.38%; gross profit margin of 28.43%; net profit to mother of 423 million yuan, a year-on-year decrease of 24.45%; and net profit without return to mother of 207 million yuan, a year-on-year decrease of 46.97%.
2024Q1 achieved revenue of 2.116 billion yuan, a year-on-year decrease of 9.82%; gross profit margin of 26.48%; net profit to mother of 0.33 million yuan, a year-on-year decrease of 91.27%; net profit after deducting non-return to mother of 58 million yuan, a year-on-year decrease of 82.83%.
Investment highlights:
The share of the pan-energy sector continues to rise, and new products such as IGBT and SiC are progressing smoothly. In 2023, the share of pan-new energy (vehicles+new energy) in the downstream application structure of the company's product and solution sector increased from 35% in 2022 to 39%. Among them, products in the automotive sector have entered key car companies such as BYD, Geely, FAW, Changan, and Wuling, and automotive-grade products are progressing steadily. In the field of new energy, the company has increased and expanded its customers in the fields of photovoltaic inverters and inverters. Its market share continues to increase, and its products are gradually entering key customers such as Sunshine Power, Deye Co., Ltd., and Huichuan. On the key product side, in 2023, the company's IGBT product sales revenue was nearly 700 million yuan, and pre-research capacity building for 12-inch high-end IGBT progressed rapidly. The size of 8-inch IGBT wafers increased by 62%. The share of sales in the industrial (including photovoltaics) sector rose to more than 70%, and cooperation with leading customers in the automotive market deepened, while IGBT module development was further accelerated. On the third-generation semiconductor product side, the company's sales revenue for silicon carbide and gallium nitride power devices increased 135% year-on-year in 2023, and the sales share of SiC MOS products rose to more than 60%, achieving batch shipments to multiple customers in various fields such as OBC for new energy vehicles, photovoltaic energy storage, and industrial power supplies.
The manufacturing and service business grew steadily, and the manufacturing+packing+testing business developed comprehensively. In 2023, the company's manufacturing and service business revenue was 5.08 billion yuan, up 2.66% year on year, and gross profit margin was 37.42%, down slightly by 0.19 pct year on year. In 2023, the company continued to strengthen its business capabilities in wafer manufacturing, package testing, and mask manufacturing. On the manufacturing side, the company has successively completed results including small-batch production of 0.18 micron HR BC (DTI) platforms and high-precision TFR being approved by customers on multiple platforms. At the test end, the company's intelligent power module package is in full production, and the new IPM packaging products developed by the company are mass-produced. Panel-level packaging capacity utilization remained high, and revenue increased 60% year over year.
On the mask business side, in 2023, the company achieved a 30.6% year-on-year increase in sales, a 20.7% year-on-year increase in net profit, a yield of 98.8% for new products, and the on-time delivery rate of key customer products climbed to 99.98%, and the core indicators remained high.
Construction of key projects is in full swing, and the 12-inch wafer wire+advanced sealing and testing project continues to advance. The company's key project layout continues to advance, including the wafer production line project. On the one hand, the company is actively promoting the upgrading of the Wuxi industrial project, planning and initiating the production capacity expansion of third-generation wide-bandgap semiconductors; at the same time, it is making every effort to promote high-end mask projects. It is planned to be connected in the first half of 2024. The second half of the year will focus on 90nm advanced process research and development. It is expected to achieve mass production and shipment as soon as possible, and further expand the 40nm production capacity of high-end mask projects. On the other hand, the company continues to promote the Chongqing 12-inch wafer production line and Shenzhen 300mm integrated circuit production line projects. Chongqing's 12-inch high-end power semiconductor wafer production line products have begun to be increased and major customers have begun to introduce them. The Shenzhen 300mm integrated circuit production line project is under construction, and the production line is scheduled to be completed by the end of 2024. In the sealing and testing project, the company will continue to promote the comprehensive construction of advanced power sealing and testing bases. With the mass production of advanced power packaging bases and the expansion of panel-level packaging production capacity, the overall revenue of the packaging sector may increase significantly in 2024.
Profit forecast and investment rating: The company is a leading domestic power semiconductor company. On the product side, the company actively covers various power device products and accelerates breakthroughs in new products such as IGBT and SiC.
On the manufacturing side, the 12-inch line volume in Chongqing climbed smoothly, and the construction of the 300mm integrated circuit production line in Shenzhen continued to advance, supporting subsequent companies' production capacity. Considering the impact of the downturn in the market and the fact that new investment projects are still in the early stages of construction, we have adjusted the company's profit forecast. The company's revenue for 2024-2026 is 111.39/124.11/13.404 billion yuan, and net profit to mother is 15.60/19.46/21.27 billion yuan, corresponding EPS is 1.18/1.47/1.61 yuan, and the corresponding PE is 31X/25X/23X, maintaining the “buy” rating.
Risk warning 1) Competition in the power semiconductor market increases risk; 2) downstream demand for power semiconductors falls short of expectations; 3) R&D progress of middle and high-end products falls short of expectations 4) Customer introduction of new products falls short of expectations; 5) New production line construction progress falls short of expectations.