Company profile: Committed to products in the inorganic filler and particle carrier industry, Shengyi Technology holds the largest share. The company has formed a product layout based on silicon-based oxides and aluminum-based oxides with complete specifications, and continues to build a comprehensive service model in the fields of integrated circuit packaging materials and thermal conductive materials. As of the 2023 annual report, leading copper-clad plate leader Shengyi Technology holds 23.26% of the company's shares and is the company's largest shareholder. Shengyi Technology has become the largest copper clad plate company in mainland China and the second largest copper clad plate company in the world. From 2013 to 2022, Shengyi Technology's global market share of rigid copper clad plate sales stabilized at around 12%.
The company's core advantages: high-end product structure, leading the industry in some key indicators. In 2020, the downstream consumption of silicon powder in China was mainly concentrated in the construction industry and paint industry, accounting for 77% in total. However, the company focuses on high-end copper-clad plates and advanced packaging. In the first three quarters of 2023, products sold to the semiconductor packaging materials (EMC) and copper-clad plate (CCL) fields accounted for about 70% of total revenue. Key indicators such as sphericity, spheroidization rate, and magnetic foreign matter of the company's products have reached or are close to leading international standards.
High frequency and high speed copper clad plates increase demand for high-end Low-Df and Low-Dk products. By comparing indicators such as peeling strength, soldering time, thermal expansion coefficient, and dielectric properties, spherical silicon powder has minimal effect on the manufacturing process and performance of copper clad plates and has the best performance. 5G promotes “high frequency and high speed” of the copper-clad plate industry. High-frequency high-speed copper-clad plates require characteristics such as low transmission loss, low transmission delay, high heat resistance, and high reliability, and need to use Low-Df, Low-Dk fused silicon powder and spherical silicon powder as key functional fillers.
HBM advanced packaging boosts the imagination space for high-end low-α products: Among the components of epoxy encapsulants, the filler content accounts for 70% to 90%. On the cost side, with reference to Huahai Chengke's announcement, silicon powder accounted for 28.86% of the raw material procurement amount from January to June 2022. HBM requires GMC (granular epoxy encapsulation) to be used to package it as a whole, and controlling the content of alpha particles in GMC that is unrelated to the operating performance of the chip is critical. Low-α spherical silicon powder and spherical alumina have the characteristics of high strength, good heat dissipation, and low alpha particle content, and are essential key materials in HBM packaging materials.
If only the downstream application areas of Lianrui New Materials are considered, the global demand for silicon powder is estimated to be 6.13 million tons in 2025: According to our estimates, if only the downstream application areas of Lianrui New Materials are considered, the global demand for silicon powder is expected to reach 6.13 million tons in 2025, and the CAGR is expected to reach 3.1% from 2021 to 2025.
Profit forecast, valuation and rating: We expect the company's net profit to be 200 million yuan, 250 million yuan, and 290 million yuan respectively in 2024-2026, +16.3%, +23.6%, and +16.7% over the same period last year. The PE corresponding to the current stock price is 44X, 36X, and 31X, respectively. Combined with the company's relative valuation and absolute valuation, considering the improvement in downstream demand and the continuous optimization of the company's product structure, the company's performance is expected to continue to grow. Covered for the first time, a “gain” rating was given.
Risk warning: risk of raw material price fluctuations, new production capacity falling short of expectations, risk of new material substitutes, etc.