Report highlights

The company is a leader in photovoltaic monocrystalline furnaces. Currently, the business layout of equipment and materials revolves around the three major semiconductor materials of silicon, sapphire, and silicon carbide. In terms of key equipment, the company has deployed fully automatic crystal growth equipment, crystal chip processing equipment, chip sorting and testing equipment, etc., and mainly targets customers in the photovoltaic and semiconductor fields. In terms of materials business, the company lays out silicon carbide substrates, sapphires, etc., and enters core consumables such as diamond wire and quartz crucibles.

In the field of photovoltaic equipment, the company mainly provides 210 large-scale equipment. TCL Zhonghuan, one of the two oligopolies of silicon wafers, is the most important customer. On the one hand, the company followed the trend of N-type technology, launched a fifth-generation monocrystalline furnace based on N-type products, introduced superconducting magnetic field technology into the photovoltaic field, and configured a user-programmable software-defined process platform based on an open architecture to create differentiated product competition; on the other hand, the company closely focuses on the needs of major customers and lays out the entire industry chain for silicon wafer-side, battery-side and component-side equipment, improving the company's ability to resist industry cycle risks.

In the field of semiconductor equipment, the company binds major downstream customers. Early in-depth cooperation with customers such as TCL Zhonghuan enabled the company to obtain endorsements in the field of semiconductor large silicon wafer crystal growth equipment, and has now entered the supply chain systems of many leading silicon wafer manufacturers. At the same time, the company continues to develop core equipment such as semiconductor silicon epitaxial, silicon carbide epitaxial, and chemical vapor deposition CVD, and is expected to continue to benefit from the wave of domestic substitution of semiconductor equipment. At present, the company has achieved full coverage and sales in 8-12 inch crystal growth, slicing, grinding, thinning, polishing, CVD, etc., and has developed 12-inch epitaxial, LPCVD, and ALD equipment based on advanced manufacturing processes. The company's 6-inch silicon carbide epitaxial equipment has achieved mass sales and rapid growth in orders, and has developed an 8-inch single-chip silicon carbide epitaxial device with international advanced standards.

Currently, the company maintains a high level of on-hand orders. By the end of '23, the company had not completed equipment orders of $28.258 billion, of which $3.274 billion (tax included) had not been completed. In terms of silicon carbide substrates, the company's 6 inch and 8 inch silicon carbide substrates have been verified by downstream customers and batch orders have been delivered. In the future, with the gradual implementation of production capacity and the increase in substrate yield, the company is expected to reach the level of first-tier silicon carbide suppliers; in terms of core consumables, the company's diamond wire project is actively expanding production, and quartz crucibles are also expected to continue to benefit from the increase in volume and price due to the mismatch between supply and demand.

Investment advice and profit forecasting

Since the company went public, the market has consistently predicted that the average PE value corresponding to the company's performance is 29.3x. Currently, the PE value corresponding to the 24-year market performance forecast (7.29x) is at a low historical valuation level. We estimate the company's net profit for 24/25 to be 5.89 billion/ 7.11 billion. First coverage, giving a “buy” rating.

Risk warning

Downside risks: Downstream demand falls short of expectations, the competitive landscape of the industry deteriorates, new materials are slowly developing upward risks: demand for downstream equipment exceeds expectations, silicon carbide cost reduction exceeds expectations, and demand for core consumables exceeds expectations.