Key points of investment:

Three-quarter report: Revenue for the first three quarters was 2.479 billion yuan, yoy +3.70%, net profit to mother was -0.536 billion yuan, yoy -352.40%, after deducting non-return net profit of -0.645 billion yuan.

24Q3 revenue for a single quarter was 0.909 billion yuan, yoy +11.4%, gross profit margin -5.22%, net profit to mother -0.148 billion yuan, yoy -687.94%, after deducting non-return net profit of -0.216 billion yuan. 2024Q3 The global semiconductor market continues to recover, and silicon wafer shipments have increased year-on-year, with a shipping area of +6% and yoy +7%. By product, the increase in silicon wafer shipments mainly comes from 300mm silicon wafers, qoq +8%, yoy +13%; demand for 200mm and smaller silicon wafers is still sluggish.

The 12-inch silicon wafer construction project progressed rapidly, with sales volume of 2.94 million wafers (yoy -3%) in 2023, and the monthly production capacity of 2024H1 expanded to 0.5 million wafers. In 2023, the subsidiary Shanghai Xinsheng shipped more than 10 million silicon wafers, making it currently the largest mass-produced 300mm semiconductor silicon chip product in China, and achieved full coverage of applications such as logic, storage, and image sensors (CIS). 2024H1, the company's total production capacity of 300mm semiconductor silicon wafers has reached 0.5 million wafers/month, and the second phase of the project can be completed by the end of the year, with a production capacity of 0.6 million wafers per month; the subsidiary Xinao Technology and Okmetic 200mm and below have a combined production capacity of more than 0.5 million wafers per month; the subsidiary Xinao Technology and Okmetic 200mm and below SOI silicon wafers have a combined production capacity of more than 0.065 million wafers per month; the subsidiary Xinao A 300mm high-end silicon-based material test line with a production capacity of about 0.06 million pieces/year was built.

The sales volume of 200mm and below silicon wafers in 2023 is 3.52 million wafers (yoy -24%), and the subsidiaries Xinao Technology, Okmetic, and New Silicon Polymer have laid out new products and new production capacity. The subsidiary Xinao Technology continues to promote the 300mm high-end silicon-based material research and development pilot project; in the epitaxial business, following the market situation with strong demand for electric vehicles and industrial products, Xinao Technology has carried out all-round cooperation with customers to actively explore the IGBT/FRD product application market, and has now achieved a good market share. The subsidiary Okmetic of Finland has launched a 200mm specialty silicon wafer production expansion project in Vantaa, Finland, which will further expand the production capacity of 200mm polishing pads for sensors and RF applications, and consolidate its market position in high-end fields such as advanced sensors, power devices, RF filters, and integrated passive devices. The subsidiary New Silicon Polymerization completed the construction of a pilot line for piezoelectric film material substrates, and some products have been verified by customers.

The profit forecast was lowered and the “gain” rating was maintained. As demand for 8-inch silicon wafers remains low, the 2024-26 revenue forecast was lowered from 4/5/7 billion yuan to 3.5/4.3/6.2 billion yuan, and the net profit forecast to mother was lowered from 0.14/0.27/0.43 billion yuan to 0.03/0.2/0.23 billion yuan. The current stock price corresponds to the 2024 PS 17X, which is 7% lower than the semiconductor materials company (Tianyue Advanced, Longtu Mask) 2024 average PS 18X, maintaining an increase rating.

Risk warning: 1) Exchange profit and loss risk. 2) New energy vehicles have fallen short of expectations. 3) LED business loss risk.