Key points of investment:
The absolute leader in photovoltaic module equipment string welding machines in the world, with a market share of over 70%. It has both “consumable-like” market space and the “Matthew effect” competitive pattern in the context of rapid iteration of module technology. It has benefited from 0BB technology iteration in the short term and has grown into a platform equipment company spanning photovoltaics, lithium batteries, and semiconductors in the long term.
The business spans the three high-quality growth tracks of PV, lithium batteries, and semiconductors, and revenue increased from 590 million yuan in 2018 to 6.3 billion yuan in 2023, with a 5-year CAGR of 60%; net profit to mother increased from 50 million yuan in 2018 to 1.26 billion yuan in 2023, or 90% CAGR in 5 years.
In the photovoltaic field, module side string welding machines account for more than 70% of the global market. Silicon wafer-side low-oxygen monocrystalline furnaces have been recognized by major customers, battery-side coating, screen printing, LEM equipment, etc., leading the share of light injection annealing furnaces; in the field of lithium batteries, module PACK lines have received leading orders such as honeycomb; in the semiconductor sector, aluminum wire bonding machines have received leading orders from Tongfu, etc., and multiple product layouts AOI testing, chip loading machines, silicon wafer CMP equipment and monocrystalline furnaces.
The “consumable-like” market space for string welding machines and the competitive pattern of “Matthew effect” module equipment is the last link in photovoltaic manufacturing. Technology iterations are the most frequent, and equipment has first-order “consumable-like” market space. Due to the rapid iteration of technology, new technology is not easy to spread, helping the strong Ultrwey to become stronger. 0BB technology accelerated penetration in HJT and TopCon in 2023 and 2024, and is expected to become the mainstream string welding technology in 2025. Benefiting from a new round of technological iteration, we expect the global string welding machine equipment market space to be about 12 billion yuan in 2025, of which Aotewei's orders are about 9 billion yuan (market share about 75%).
Vertical expansion: Resource advantages drive the rapid signing of low-oxygen monocrystalline furnaces. The market expects to launch cost-effective low-oxygen monocrystalline furnaces in May 2023, continuously receiving big orders of 480 million yuan from Jingke, 290 million yuan from Hesheng Silicon, and 1.89 billion yuan from Tianhe Solar, and more than 3 billion yuan in new orders throughout the year. Currently, leading equipment suppliers have a market share of 70% +. We believe that downstream customers will choose 1-2 suppliers other than leading suppliers due to supply safety & supply capacity considerations, while Autoway has accumulated more integrated high-quality customers in the component sector. As an independent third party & qualified supplier, it is expected to gain more than 10% of the market share.
Horizontal expansion: The same technology accelerates semiconductor aluminum wire bonding machines to break through foreign monopolies. Semiconductor aluminum wire bonding machines and string welders have the same technology, all testing the speed, accuracy and stability of the equipment.
The company completed internal verification of aluminum wire bonding machines in 2020, breaking through foreign monopolies, and successively received orders from leading customers such as Delixin, Tongfu Microelectronics, and SMIC in 2021-2023. Currently, the domestic aluminum wire bonding machine market space is about 2.5 billion yuan, and the localization rate is only 3%. We believe that the company is expected to gain a certain share of the market with its cost-effective advantages.
Investment advice: Optimistic about the high-quality equipment leader under 0BB technology iteration. We expect the company's revenue in 2024-2026 to be 103/127/15.7 billion yuan, with year-on-year growth rates of 63%/24%/23% respectively; net profit to mother is 19.3/25.0/3.07 billion yuan, with year-on-year increases of 53%/30%/23%, respectively. Comparable companies' average PE in 2024 was 15 times higher. Based on the company's string welding machine business having technical and market advantages and consumable attributes, we gave the company a 15 times valuation in 2024, corresponding to a target price of 92 yuan/share, and for the first time coverage, a “buy” rating.
Risk warning: Downstream demand falls short of expectations, and new business development falls short of expectations.