Report highlights:
A leading domestic sputtering target company, with a complete range of products to reach mainstream customers. Olay New Materials has been deeply involved in the field of sputtering targets for many years. Its products include products such as copper targets, aluminum targets, molybdenum and molybdenum alloy targets, and ITO targets. Customers also include well-known companies such as BOE, Huaxing Optoelectronics, Huike, Vietnam Asia Semiconductor, and SK Hynix.
Downstream applications are flourishing, and product certification helps the company grow. 1) AI has begun to empower electronic products such as AI PCs and AiPhone. A new round of innovation will drive the boom in sputtering targets required for display panels. The market space for sputtering targets for flat panel displays in China is estimated to be about 39.5 billion yuan in 2026. 2) The integrated circuit market is growing steadily, driving the market for semiconductor materials such as sputtering targets to continue to rise.
3) The penetration rate of new energy vehicles is accelerating. Global and Chinese lithium battery shipments in 2022 increased by 70.3% and 97.7%, respectively. Sputtering targets are expected to benefit from this as essential materials for composite copper foil and aluminum foil in batteries. 4) The increase in solar cell production is expected to drive the market size CAGR of sputtering targets to reach 17.54% in 2021-2026. The company has achieved batch supply of G5, G6, G8.5, G8.6, G10.5, G11 and other generation products, and the core technical indicators of the company's G8.5, G10.5 planar copper targets, and G10.5 planar ITO targets have reached the world's advanced level, achieving import substitution. In addition, the company's ITO targets for semiconductor displays successfully passed Rainbow Optoelectronics's first set of product tests in June 2023 and entered the mass supply stage. Mainstream display panel manufacturers such as Huike, Huaxing Optoelectronics, and Ultra Vision are in the first product testing process. The company's ITO targets for solar cells are also in the product certification process for Huasheng New Energy, Juneng Electric Power, and BYD supply chains. As the company's products continue to pass customer verification, revenue is expected to usher in a new round of development cycle.
Fund-raising projects help increase production and reduce costs, and open the company's growth limit. The company raised 384 million yuan for three projects: a high-end sputtering target production base, the construction of a high-purity oxygen-free copper production base, and an integrated circuit target R&D and trial production base. The high-end sputtering target production base project will break through the company's production capacity bottleneck in the post-sputtering target process, adding copper targets, aluminum targets, molybdenum and molybdenum alloy targets, and ITO targets with production capacity of 1,050 tons, 60 tons, 90 tons and 140 tons/year, respectively. The high-purity oxygen-free copper production base project will help extend the company's industrial chain upward, reduce the company's production costs, increase the added value of products, and provide the stability and consistency of the company's sputtering target products.
Investment advice and profit forecasting
We expect that in 2024-2026, the company's revenue will be $528/6.05/705 million yuan, and the corresponding EPS will be 0.36/0.44/0.53 yuan/share. Considering that the company is a leading domestic sputtering target company and is affected by rising prosperity in downstream fields such as display panels, superimposed fund-raising projects will open up production capacity bottlenecks and enter a new round of development. Covered for the first time, a “gain” rating was given.
Risk warning
The progress of the fund-raising project falls short of expectations; risk of fluctuations in raw material prices; risk of fluctuations in downstream demand.