Key points of investment:
The company's cutting equipment and consumables each meet the needs of the high-speed and refined market, and are developing rapidly with Dongfeng New Energy's main business; the slicing foundry business has also brought sufficient cash flow and growth points to the company.
The company is a leading cutting leader in high hard and brittle materials covering the pan-semiconductor sector. Since its establishment in 2006, Gaosheng Co., Ltd. has continuously expanded application scenarios around cutting technology. Currently, it has created three business growth curves: “photovoltaic material cutting+semiconductor, magnetic materials and sapphire cutting+slicing foundry”. Benefiting from the massive expansion of production by downstream silicon wafer companies in recent years, demand for silicon wafer slicing equipment and consumables has grown rapidly. The company's revenue increased from 750 million yuan in 2020 to 6.18 billion yuan in 2023, with a CAGR of 102% during the period; net profit to mother rose from 59 million yuan in 2020 to 1,461 million yuan in 2023, and the net profit CAGR during the period reached 192%.
The iteration of photovoltaic technology lengthens the prosperity of cutting equipment and consumables in the main business. Photovoltaic cost reduction and efficiency drive the development of slicing processes in the direction of thinning and thinning. (1) From the perspective of market space, technology iteration has led to equipment replacement and lengthened the popularity of cutting equipment; the smaller the diameter of the diamond wire, the higher the price, and the larger the market space. (2) From the perspective of the competitive landscape, technological iteration enables leading R&D companies to maintain their technological advantages and enjoy a high market share. According to our estimates, in 2024, the market space for cutting equipment and consumables was about 5.6 billion yuan and 12.2 billion yuan respectively. As an industry leader, Gaosec benefited from technological iteration.
Expand the chip foundry business to achieve horizontal integration and feed back the main R&D business for two types of customers. The chip foundry business provided by Gaosec has developed rapidly, becoming the company's cash cow business, and in reverse promoting the R&D efficiency of cutting equipment and consumables. The company's slicing foundry business achieved revenue of 106 million yuan, 929 million yuan and 1,719 million yuan respectively in 2021, 2022, and 2023, contributing more than 700 million yuan in gross profit in 2023, accounting for 27.79% and 28.13% of revenue and gross profit respectively.
The rapid development of this business can better transform the company's R&D into revenue and profit, and fully enjoy the technological dividends. We expect the company to develop 88GW of foundry production capacity in 2025, fully unleashing the flexibility of performance.
Profit forecasting, valuation and investment advice
We expect the company's revenue for 2024-2026 to be 65.1/86.3/10.64 billion yuan, with year-on-year growth rates of 5.22%/32.67%/23.21%, respectively; net profit to mother of 10.4/13.9/1.74 billion yuan, and EPS 1.9/2.6/3.2 yuan/share, respectively. Comparatively, the company's average PE in 2024 was about 10-20 times. Given the company's strong technical advantages and high growth performance in the next two years, the company was given 13 times PE in 2024, with a target price of 24.9 yuan, giving it a “buy” rating.
Risk warning: (1) The installed capacity of the photovoltaic industry falls short of expectations; (2) the pace of technological upgrading of cutting equipment and consumables is not consistent with expectations.
Key points of investment:
The company's cutting equipment and consumables each meet the needs of the high-speed and refined market, and are developing rapidly with Dongfeng New Energy's main business; the slicing foundry business has also brought sufficient cash flow and growth points to the company.
The company is a leading cutting leader in high hard and brittle materials covering the pan-semiconductor sector. Since its establishment in 2006, Gaosheng Co., Ltd. has continuously expanded application scenarios around cutting technology. Currently, it has created three business growth curves: “photovoltaic material cutting+semiconductor, magnetic materials and sapphire cutting+slicing foundry”. Benefiting from the massive expansion of production by downstream silicon wafer companies in recent years, demand for silicon wafer slicing equipment and consumables has grown rapidly. The company's revenue increased from 750 million yuan in 2020 to 6.18 billion yuan in 2023, with a CAGR of 102% during the period; net profit to mother rose from 59 million yuan in 2020 to 1,461 million yuan in 2023, and the net profit CAGR during the period reached 192%.
The iteration of photovoltaic technology lengthens the prosperity of cutting equipment and consumables in the main business. Photovoltaic cost reduction and efficiency drive the development of slicing processes in the direction of thinning and thinning. (1) From the perspective of market space, technology iteration has led to equipment replacement and lengthened the popularity of cutting equipment; the smaller the diameter of the diamond wire, the higher the price, and the larger the market space. (2) From the perspective of the competitive landscape, technological iteration enables leading R&D companies to maintain their technological advantages and enjoy a high market share. According to our estimates, in 2024, the market space for cutting equipment and consumables was about 5.6 billion yuan and 12.2 billion yuan respectively. As an industry leader, Gaosec benefited from technological iteration.
Expand the chip foundry business to achieve horizontal integration and feed back the main R&D business for two types of customers. The chip foundry business provided by Gaosec has developed rapidly, becoming the company's cash cow business, and in reverse promoting the R&D efficiency of cutting equipment and consumables. The company's slicing foundry business achieved revenue of 106 million yuan, 929 million yuan and 1,719 million yuan respectively in 2021, 2022, and 2023, contributing more than 700 million yuan in gross profit in 2023, accounting for 27.79% and 28.13% of revenue and gross profit respectively.
The rapid development of this business can better transform the company's R&D into revenue and profit, and fully enjoy the technological dividends. We expect the company to develop 88GW of foundry production capacity in 2025, fully unleashing the flexibility of performance.
Profit forecasting, valuation and investment advice
We expect the company's revenue for 2024-2026 to be 65.1/86.3/10.64 billion yuan, with year-on-year growth rates of 5.22%/32.67%/23.21%, respectively; net profit to mother of 10.4/13.9/1.74 billion yuan, and EPS 1.9/2.6/3.2 yuan/share, respectively. Comparatively, the company's average PE in 2024 was about 10-20 times. Given the company's strong technical advantages and high growth performance in the next two years, the company was given 13 times PE in 2024, with a target price of 24.9 yuan, giving it a “buy” rating.
Risk warning: (1) The installed capacity of the photovoltaic industry falls short of expectations; (2) the pace of technological upgrading of cutting equipment and consumables is not consistent with expectations.