Performance reviews

Taiji Industrial announced its 2020 performance report, achieving revenue of 17.8 billion yuan, an increase of 5% over the previous year, and net profit of 830 million yuan, an increase of 33% over the previous year.

Management analysis

In the second half of the year, the turnkey contract order collection and execution speed increased, helping the overall revenue growth throughout the year: in the first half of the year, the execution of general contracting projects affected by the epidemic accelerated the pace of contract signing and project implementation in the second half of the year.

In the second half of the year, Eleven Technology announced and signed projects such as the 12-inch integrated circuit R&D and manufacturing plant and supporting facilities project of the Shanghai Integrated Circuit Equipment and Materials Industry Innovation Center, Geke's 12-inch CIS industrialization EPC turnkey project, and the integrated circuit demonstration line project (phase I) factory system package project. According to the announced order items, we expect the company's on-going engineering contracts to increase significantly compared to 2019, laying the foundation for the company's revenue growth in 2021. At the same time, advance payments for some projects will reduce the company's liabilities and thereby reduce financial expenses.

Growth in memory packaging and testing can be expected: The company has accumulated long-term experience in the field of storage packaging and testing, and Taiji Semiconductor will benefit from Hefei Changxin and Changjiang Storage's production expansion plans over the next five years. The production capacity of the first phase of Hefei Changxin is 120,000 pieces/month. We expect the company to receive a certain percentage of memory packaging orders supporting Hefei Changxin, thus achieving a second memory packaging profit growth point other than Haitai Semiconductor.

Investment advice

Due to the increase in the amount of total contract orders signed in the second half of the year, we raised the company's profit forecasts for 2021 and 2022 to 1.16 billion yuan (up 16%) and 1.48 billion yuan (up 13%), maintaining the company's “buy” rating.

Risk Alerts

Business risk of excessive customer concentration; risk of memory downturn cycle to cash cost price; performance risk caused by weak follow-up orders in cleanroom engineering and design business