Key points of investment

24Q1 revenue increased year-on-year, and the margin of loss narrowed

In 2023, the company achieved revenue of 2,690 billion yuan, a year-on-year decrease of 7.71%; net profit to mother was 66 million yuan, a year-on-year decrease of 90.44%. The decline in the company's performance in '23 was mainly due to product price cuts affected by macroeconomics and market demand, cost pressure to expand production, phased losses from acquisitions, and increases in accrued interest expenses on convertible bonds.

The 24Q1 company achieved revenue of 679 million yuan, an increase of 7.41% over the previous year; achieved net profit of -63 million yuan, and the loss margin narrowed month-on-month (net profit to mother of -120 million yuan in 23Q4).

Semiconductor silicon wafers continued to develop new products, and production expansion was gradually implemented to increase production capacity and supply revenue. In 23, the company's semiconductor silicon wafers achieved revenue of 1,792 billion yuan (including revenue of rival Ang Wei's parent company 291 million yuan), a year-on-year decrease of 10.94%. In terms of sales volume, the equivalent sales volume of 6 inch tablets was 9.8436 million, up 0.72% year on year, of which 498,600 12-inch silicon wafers were sold, an increase of 35% year over year. In terms of production capacity, the Quzhou base's annual production of 6 million 6-8 inch silicon polishing pads project is expected to complete the migration of 8-inch 250,000 pieces/month of additional production capacity equipment in September 2024; the 12-inch silicon polishing sheet expansion project at the Jiaxing base is expected to reach 150,000 pieces/month production capacity by the end of 2024.

Power device chip sales reached a record high. In terms of revenue growth for photovoltaic products, the company's semiconductor power device chips achieved revenue of 1,029 billion yuan in '23, a year-on-year decrease of 4.56%. In terms of sales volume, sales of power device chips were 1.715,800 pieces, up 8.87% year on year, of which 899,700 chips were sold, up 35% year on year; FRD chips were sold 981 million, up 80.16% year on year, and IGBT chips began to be supplied in small batches. In terms of categories, the company's photovoltaic products grew at a high level, accounting for about 37% of global photovoltaic chip sales throughout the year, and the automotive product customer base continued to expand.

Domestic replacement of RF chips is accelerating, and product volumes continue to be released. Performance is growing rapidly. In terms of revenue, the company's Compound Semiconductor RF chips achieved revenue of 137 million yuan, an increase of 171% over the previous year. In terms of sales, RF chips were sold at 17,900 pieces, an increase of 141.19% year over year.

Benefiting from breakthroughs in product technology and smooth customer verification, the company's RF chip verification process has basically covered mainstream domestic mobile phone chip design customers, and domestic replacement has been accelerated; multi-specification, small-batch, multi-purpose, and high-value-added special use products have continued to be released, and low-orbit satellite customers have passed verification and begun mass shipments; there are plenty of orders for RF chips in hand, capacity utilization rates have risen sharply year on year, production and sales volume and revenue have reached historical peaks, and the negative gross margin situation has narrowed drastically.

Profit forecasting and valuation

We expect the company's net profit to be 2.1, 4.1, and 640 million yuan respectively in 2024-2026, with year-on-year growth rates of 223%, 92%, and 58% respectively, corresponding to PE of 71, 37, and 24 times, respectively, maintaining a “buy” rating.

Risk warning

Risk of imbalance between supply and demand, risk of sales falling short of expectations, risk of continued sluggish industry sentiment