The company's main business is mainly divided into three major segments, namely semiconductor silicon wafers, semiconductor power device chips, and compound semiconductor RF chips. The main products include 6-12 inch semiconductor silicon polishing sheets and silicon epitaxial wafers; 6 inch SBD chips, 6 inch FRD chips, 6 inch MOSFET chips, 6 inch TVS chips, and 6 inch IGBT chips; 6 inch gallium arsenide microwave RF chips, and 6 inch VCSEL chips.

The three business segments have a wide range of product applications, including 5G communications, smart phones, computers, automotive industry, photovoltaic industry, consumer electronics, low-orbit satellites, smart grids, medical electronics, artificial intelligence, and the Internet of Things. After more than 20 years of development, the company has grown into one of the leading one-stop manufacturing platforms from silicon wafers to chips in China. It has formed a business model that drives the R&D and industrialization of large silicon wafers with profitable small-size silicon products, and drives the compound semiconductor RF chip industry's business model with mature semiconductor silicon wafer business and semiconductor power device chip business. It has well balanced the company's profitability and future development potential, laying a solid foundation for the company's continuous and rapid development.

The company has the advantage of integrating upstream and downstream industrial chains. This is the company's unique advantage in the industry.

The company covers various upstream and downstream production links in the semiconductor industry chain, including silicon single crystal drawing, silicon polishing sheets, silicon epitaxial sheets, power device chips, and compound semiconductor RF chips, and has penetrated the entire chain technology from materials to chips. The company's power device chip manufacturing materials come from the company's own silicon wafers, which is conducive to giving full play to the advantages of upstream and downstream integration of the industrial chain, enabling the company to carry out quality control and process optimization from the raw material side, shorten the R&D verification cycle, ensure R&D design flexibility, withstand short-term supply and demand shocks while guaranteeing profit levels, improve performance stability, and facilitate the company's steady operation.

The RF business performed well and became a new engine for performance growth. The company's compound semiconductor RF chip business progressed rapidly in 2023 and performed well. Thanks to complete breakthroughs in product technology, client verification has basically covered mainstream domestic mobile phone chip design customers and major downstream mobile phone customers; thanks to the recovery of consumer electronics and the acceleration of import substitution, abundant on-hand orders, a sharp year-on-year increase in capacity utilization, production and sales volume and revenue reached historical peaks, and the negative gross margin situation has narrowed dramatically. On the market side, we have developed many customers on the basis of stabilizing core customers, with a customer base of more than 160, and successfully entered the supply chain of well-known mobile phone brand companies.

Profit forecast, valuation and rating: Due to weak downstream demand, we lowered the company's 2024-2025 net profit forecast to 1.54 billion yuan (-75.36%, same as the original forecast) and 2.61 (-68.74%), respectively. The forecast for the additional 2026 net profit is 0.425 billion yuan, and the current market value corresponding to 2024-2026 PE is 87x, 51x, and 31x, respectively. The company has now completed the three major business layouts of “silicon wafer+power device+RF chip foundry”. We are optimistic about the company's industrial chain integration advantages, and the resonance of increased silicon content driven by downstream demand such as the new energy industry chain and 5G as fab production expands, and maintains a “buy” rating.

Risk warning: Downstream demand falls short of expectations, capacity expansion falls short of expectations, and product development progress falls short of expectations.