Tianyue Advanced released its 2024 semi-annual report: The company achieved total revenue of 0.912 billion yuan for the first half year of 2024, an increase of 108.27% over the previous year; achieved net profit of 0.102 billion yuan, which turned a year-on-year loss into a profit; after deducting net profit of 9622.61, the company turned a loss into a profit.

Key points of investment

Revenue in a single quarter reached a record high, and profitability continued to improve. Looking at the single quarter, the company achieved revenue of 0.486 billion yuan in a single quarter, up 98.49% year on year, up 14.1% month on month, and achieved a month-on-month increase on the revenue side for 9 consecutive quarters. On the other hand, the company's Q2 gross margin increased to 23.97, up 13.28 pcts year on year and 2.05 pct month on month; net profit without return to mother was 0.053 billion yuan, up 181.16% year on year, up 20.67% month on month, and profitability continued to strengthen.

Shanghai's Lingang production capacity was gradually released, and its market share rose to the top three production capacities in the world. In the first half of 2024, the company's Shanghai Lingang plant was able to achieve large-scale mass production capacity of 0.3 million conductive substrates per year. At the same time, the company is continuing to advance the second phase of the Lingang Plant's 8-inch silicon carbide substrate production expansion plan. The overall production capacity plan is about 0.6 million pieces, which will be implemented in stages.

On the customer side, the company has successfully entered the supply chain of major international manufacturers. The company has been recognized by international first-tier customers for product stability and consistency, including cooperation with many leading international manufacturers such as Infineon, Bosch, and Ansemi. The company provides Infineon with 6-inch conductive substrates and crystal bars, which account for the double-digit level of Infineon's demand, and the company will also help Infineon's transition to 8-inch products. Up to now, more than 50% of the world's top ten power semiconductor companies have become company customers, accounting for the world's top three market share of conductive silicon carbide substrate materials.

R&D drives innovation. 8-inch products have been sold in batches in the first half of 2024. Tianyue's advanced R&D expenses reached 56.2098 million yuan, focusing on forward-looking technologies such as 8-inch and liquid phase methods. Currently, there are 10 research projects. At present, the company has caught up with major overseas substrate manufacturers in semi-insulating substrates and 6-inch silicon carbide substrates. On 8-inch silicon carbide substrates, the company took the lead in achieving independent diameter expansion, completed a rapid layout from preparation to industrialization of 8-inch conductive substrates, and was the first to achieve mass sales to overseas customers.

Profit forecasting

It is predicted that the company's revenue for 2024-2026 will be 2.343, 3.487, and 4.224 billion yuan, respectively, and EPS will be 0.53, 0.83, and 1.28 yuan, respectively. The current stock price is 87.0, 55.3, and 35.7 times PE, respectively. We are optimistic that the company's first-mover advantage in the silicon carbide field. As the company's second-phase production capacity continues to advance, we are optimistic that the company's performance will rise to the next level and maintain a “buy” rating.

Risk warning

Downstream demand falls short of expectations, risk of production capacity release falling short of expectations, risk of increased market competition, risk of technology iteration, risk of R&D progress falling short of expectations, etc.