The company's net profit to mother increased by about 507% year-on-year in 1Q24. The company's main business is silicon carbide long crystal furnaces, semiconductor-grade silicon single crystal furnaces and related crystal equipment; as silicon carbide penetration accelerates, demand for silicon carbide long crystal furnaces is relatively good. In '23, the company achieved revenue of 410 million yuan (YoY +82.7%), net profit of 71 million yuan (YoY +106%), and a gross profit margin of 33.5% (YOY-1.8pct). On this basis, the company delivered on-hand orders one after another, and 1Q24 achieved revenue of 80 million yuan (YoY +111.3%, QoQ -51.1%), net profit to mother of 15 million yuan (YoY +507.4%, QoQ -46.3%), and gross profit margin of 33.7% (YoY-5.1pct, QoQ+2.8pct).
The silicon carbide long crystal furnace covers top customers, and the 8 inch substrate penetration is expected to increase the ASP of the long crystal furnace. The company's silicon carbide single crystal furnace is mainly used in the preparation of 6-8 inch silicon carbide single crystal substrates. Customers include major manufacturers in the industry such as Sanan Optoelectronics, Tony Electronics, Tianyue Advanced, and BYD. On this basis, the company and customer J signed a “silicon carbide furnace equipment sales contract” of about 120 million yuan, and the amount to be fulfilled is 99 million yuan. Furthermore, with the launch of 8-inch silicon carbide substrates and the penetration of 8-inch long crystal furnaces, product ASP is expected to increase, and the future silicon carbide long crystal furnace business is expected to maintain rapid growth along with product iteration demand.
Semiconductor-grade monocrystalline silicon furnaces with processes above 28 nm have been mass-produced. Since entering the semiconductor monocrystalline silicon furnace field requires verification by silicon wafer/substrate manufacturers and audit by chip manufacturers, monocrystalline silicon furnaces can only enter the silicon wafer supply chain after device performance verification. The verification barriers are high and the localization rate is low. The company's customers have covered the Shanghai Silicon Industry (Shanghai Xinsheng), Shengong Co., Ltd., and Crystalline Technology; covering mainstream 12-inch and 8-inch light-duty silicon wafers, the manufacturing process above 28 nm has achieved mass production.
The PV equipment contract has an amount of 290 million yuan to be fulfilled, opening up diversified growth space for category business. Previously, the company signed a “Gaojing Equipment Purchase Contract” with Sichuan Gaojing Solar Technology. The total contract price including tax is about 339 million yuan, including monocrystalline furnace control systems, photovoltaic grade monocrystalline furnaces and ancillary products. The amount to be fulfilled is 290 million yuan. In addition, the company's self-developed automated pull-crystal control system for G10 to G12 solar cells has been introduced to the market. In the future, as the business of photovoltaic products and other materials and equipment expands, the company's growth path will gradually diversify.
Investment proposal: Based on the pace of execution of the company's contracts and the operating situation since '23, slightly lowering the company's order delivery pace and raising the company's R&D expenses rate, the company is expected to achieve net profit of 1.14/1.29/142 million yuan in 24-26 (previous value of 1.21/157 billion yuan in 24-25), corresponding to PE 36/32/29 times in 24-26, respectively, maintaining the “increase in holdings” rating.
Risk warning: Demand for silicon carbide single crystal furnaces falls short of expectations, semiconductor grade single crystal furnace volume falls short of expectations, etc.