Ultrapure sputtering targets are built to expand the boundaries of semiconductor components. Jiang Feng Electronics has been rooted in ultra-high purity metal sputtering targets for nearly 20 years and has become the world's leading manufacturer of semiconductor sputtering targets. Furthermore, the company is expanding its semiconductor precision parts business based on a mature industrial chain and deep customer resources, with strong growth potential. At the same time, the company fully covers advanced manufacturing processes, mature processes and characteristic process fields, and is a core supplier to world-renowned companies such as TSMC, SMIC, SK Hynix, Lianhua Electronics, and BOE. Based on this, since 2018, the company's revenue has continued to grow, and its profitability has been steady, moderate and positive. In 2023, the company showed strong anti-cyclical ability, with revenue reaching 2.602 billion yuan, an increase of 11.89% year on year; in '24, the company achieved a year-on-year increase in both revenue and net profit due to industry recovery.

Ultrapure metal sputtering targets are widely used in multiple downstream applications, and the market space is broad. The company's sputtering targets are mainly used in the semiconductor and flat screen display industry. Among them, ultra-high purity metal targets for semiconductors are strongly tied to the chip manufacturing industry chain, benefiting from increased utilization rates in the short term and beneficial to industrial upgrading and capital investment in the long term. Furthermore, sputtering targets for flat panel displays are expected to benefit from the growth and upgrading of demand for downstream screen displays. Rooted for nearly 20 years, the company has established an industrial chain from metal purification to final products, with advanced production equipment technology and excellent product performance.

At present, the purity of the company's various sputtering targets has reached international advanced standards. Copper-manganese alloy targets have been mass-produced at home and abroad, and the market share of wafer manufacturing targets ranked second in the world in 2023.

Semiconductor components are the cornerstone of the semiconductor industry, and domestic substitution is about to accelerate. Semiconductor equipment components need to meet many requirements such as high precision, high cleanliness, and corrosion resistance, which directly determines the reliability and stability of the equipment. However, semiconductor components are difficult and highly technical, and are highly monopolized by the US, Japan, and Europe. Furthermore, overseas technology blockades against China have intensified, the will to make key technologies autonomous and controllable is becoming stronger, and a wave of localization of semiconductor components is gradually beginning. Jiang Feng Electronics leverages the technology, experience and customer advantages accumulated in sputtering targets to comprehensively lay out metal and non-metallic semiconductor precision components. Currently, several of the company's production bases have been put into operation one after another, and a large number of new products have completed technical research. Among them, various components such as gas distribution panels (shower heads) and Si electrodes were released rapidly, filling gaps in localization, driving revenue growth, and depicting the company's second growth curve.

Profit forecast and investment suggestions: Currently, the average PE valuation of comparable companies after 2024-2026 adjustments has reached 44/33/27 times. We expect the company to achieve net profit of 0.351/0.458/0.616 billion yuan in 2024-2026. We are optimistic that the company's parts business will use a platform-based card layout, which corresponds to the current PE valuation of 52/40/30 times. First coverage, giving a “buy” rating.

Risk warning: Risk of industry and market fluctuations, risk of exchange rate fluctuations, risk of new product development and promotion falling short of expectations, risk of declining profitability due to expansion of investment scale.