Incident Overview

On October 30, the company released its report for the third quarter of 2024. The company achieved operating income of 1.281 billion yuan, yoy +55.34%; 2024Q1-3 net profit of 0.143 billion yuan, including 2024Q1-3 net profit of 0.041 billion yuan, yoy +982.08%; 2024Q1-3 deducted non-return net profit of 0.135 billion yuan.

Analysis and judgment

Rooted in a key link in the third-generation semiconductor industry, taking advantage of the industry's Dongfeng to internationalize. Third-generation semiconductors have become the focus of international competition under the global energy electrification and low carbon development trend, and are also a cutting-edge and emerging field of China's current key layout. According to NE Era data:

In 2024H1, the installed capacity of China's passenger car power modules reached 6.16 million sets, yoy +57%, of which the installed capacity of silicon carbide power modules was 0.735 million units, an increase of 83% over the previous year; in 2023, the penetration rate of the main drive silicon carbide module for domestic Shanghai Insurance passenger cars was about 10.7%. We believe that in the context of the accelerated popularization of 800V models, the silicon carbide penetration rate is expected to continue to increase. In addition to the electric vehicle sector, which accounts for the largest share of applications, silicon carbide technology has also shown outstanding development trends in fields such as wind and solar new energy, power grids, etc., and continues to empower new fields such as data computing centers and low-altitude flight. According to YOLE forecasts, the global silicon carbide device scale is expected to reach 8.906 billion US dollars in 2028.

Since 2024, demand for high-quality conductive silicon carbide substrates has continued to be strong in the international market.

Tianyue Advanced is rooted in key links in the industrial chain and has always built long-term core competitiveness around technology, production capacity, customers and markets. As of 2024H1, more than 50% of the world's top ten power semiconductor companies have become the company's customers. At the same time, the company is accelerating cooperation with first-tier manufacturers such as Infineon and Bosch, which will help Infineon transform to 8-inch products in the future.

The industry is entering the 8-inch era at an accelerated pace, and the forward-looking layout helps create a first-mover advantage. Long-term cost reduction demand for silicon carbide devices is driving the upgrade of the substrate process to 8-inch. The construction of 8-inch wafer factories by major international first-tier manufacturers has also entered the stage of commissioning one after another, and demand for 8-inch silicon carbide substrates will continue to grow in the future. With its forward-looking layout at the 8-inch substrate end, the company already has a first-mover advantage and leading position. It has not only achieved localized replacement of 8-inch silicon carbide substrates, but has also taken the lead in mass sales to overseas customers. 2024H1, the company's Shanghai Lingang plant has been able to achieve large-scale mass production capacity of 0.3 million conductive substrates per year. At the same time, the second phase of the 8-inch silicon carbide substrate expansion plan is also progressing steadily. We believe that the company can use high-quality products, leading production capacity scale, and high-volume stable supply capacity to keep up with the expansion of production of international first-tier customers, gain widespread customer recognition and cultivate development competitiveness.

Strengthen core technical links and continue to explore high-potential application areas. The company has long been deeply involved in the core technology of silicon carbide substrates, and has achieved the development of 2-8 inch silicon carbide single crystals and substrates through independent diameter expansion. Furthermore, the company actively explored the feasibility of liquid phase long crystal technology, and successfully prepared polymorphic single crystals and substrates such as 8-inch N-type 4H-SiC, with remarkable phased results. At the same time, with the outstanding performance of silicon carbide crystal materials, the company is also continuing to explore new application fields of silicon carbide materials, including heat sink, acoustic surface waves, optical waveguides, etc. We believe that with the further maturity of the technology, the silicon carbide industry will also continue to expand its original coverage to help the company develop in the long term.

Investment advice

Maintain a “buy” rating. We adjusted the company's 2024-2026 net profit forecast to 0.196/0.393/0.512 billion yuan. The corresponding EPS was 0.46/0.92/1.19 yuan, respectively, and the corresponding PE valuation was 130/65/50 times, respectively.

Risk warning

Demand for terminals falls short of expectations, industry competition intensifies, R&D progress falls short of expectations