Core views

The leading position continues to stabilize, and the moat continues to widen. Jiang Feng Electronics is a leading enterprise in high-purity metal sputtering targets. The company has mastered the core technology in the production of ultra-high purity metal sputtering targets. In the field of advanced manufacturing processes, the company's ultra-high purity metal sputtering targets have been mass-produced on clients. We believe that the company's R&D innovation continues to maintain technological leadership, and the moat is expected to continue to expand. The company has established a good reputation in domestic and foreign markets, and has become a supplier to many major international manufacturers. At the same time, with the promotion of localization of equipment and production lines, the company has gradually achieved autonomous control of production equipment and localization of production lines. The company's target business is stable, and the production line is highly autonomous and controllable. As R&D results continue to be implemented, the high-purity sputtering target business is expected to continue to grow in the future.

The three major businesses continued to grow, and 24H1's performance increased. From a global perspective, the sputtering target market may reach 25.8 billion US dollars in 2023, and the CAGR may reach 12.25% from 2017 to 2023; high-purity metal sputtering targets are expected to reach 5.705 billion US dollars in 2028, and the CAGR may reach 7.6% from 2023 to 2030. The company is actively promoting production expansion plans, and several production sites are progressing smoothly. The cumulative investment progress of the construction project for high-purity metal targets and components for flat panel displays at the Wuhan base has reached 54.62%. Ningbo Jiangfeng Electronics industrialization project with an annual output of 0.052 million ultra-high purity metal sputtering targets for ultra-large-scale integrated circuits, and the industrialization project for ultra-high purity metal sputtering targets for ultra-large-scale integrated circuits with an annual output of 0.018 million in Haining, Zhejiang, are under active construction.

With 2024H1, the company achieved operating income of about 1.627 billion yuan, +35.91% year on year, and net profit to mother of about 0.161 billion yuan, +5.32% year over year; achieved 0.855 billion yuan in a single quarter in the second quarter, reaching record highs for ultra-high purity targets and precision components. We believe that the target market is growing steadily, and the company may expand production or further enhance its market share and competitive position.

Components created a second growth curve, and three and a half generations of materials progressed smoothly. In 2023, the semiconductor precision components business achieved sales revenue of 0.57 billion yuan, an increase of 58.55% over the previous year. In 2024, the holding company Hangzhou Ruisheng Semiconductor began construction of an industrialization project for core components of integrated circuits with an annual output of 0.15 million chips. The company has made progress in the field of third-generation semiconductor materials: Jiang Feng's high-end copper-clad ceramic substrates have been recognized by the market, and Jingfeng Xinchi's silicon carbide epitaxial wafer products have been recognized by many customers. We believe that the company continues to actively expand new growth points, and with the smooth development of precision semiconductor components and third-generation semiconductor businesses, the company's performance is expected to continue to benefit.

Profit forecasting and investment advice

The first coverage gives a “buy” rating. We expect the company's net profit to be 0.338 billion yuan, 0.446 billion yuan, and 0.587 billion yuan respectively in 2024-2026, corresponding to EPS of 1.27 yuan, 1.68 yuan, and 2.21 yuan respectively. The corresponding 2024-2026 PE values were 60.96 times, 46.14 times, and 35.08 times, respectively. We are optimistic that the company will usher in an increase in demand after the recovery of the semiconductor cycle. At the same time, it will benefit from the acceleration of domestic substitution and the rapid increase in market share of its own technical advantages, and further open up room for growth through the active introduction of components and three and a half generations of products.

Risk warning

The semiconductor cycle fluctuates, domestic substitution falls short of expectations, and the development of new technology falls short of expectations.