Silex's performance promises for scarce MEMS OEM targets have been exceeded. The company initiated a merger and acquisition of Silex Microsystems AB, one of the world's top five MEMS foundry companies, in August 2015, and completed 100% ownership in September 2016. Silex performed well in the 2015-2017 performance commitment period. The performance completion rates were 118.94%, 171.55%, and 116.37% respectively, and the overall completion rate was 133.42%, which greatly exceeded the performance promise. Benefiting from the high level of prosperity in the downstream market, the company's MEMS business continued to grow rapidly in the first three quarters of 2019, achieving revenue of 385 million yuan, an increase of 35.67% over the same period last year. With the gradual development and implementation of the IoT ecosystem, the wide expansion and application of MEMS terminal equipment, and the continuous evolution of the MEMS industry's specialized division of labor trends, demand for MEMS chip process development and wafer manufacturing in the fields of communications, biomedicine, industrial science, consumer electronics, etc. continues to grow, ensuring a high growth rate of Silex's performance.
The Swedish production line has been upgraded, and the Beijing production line is about to be put into operation, opening up a new space for growth. As the production capacity of the Swedish production line continues to increase and the production capacity of the Beijing production line is gradually built, the company intends to expand the development stage business and prepare customer and order reserves for the mass production stage business. It is expected that the “8-inch MEMS International Foundry Line Construction Project” in Beijing will be put into operation in 2020 and reach a stable period six years later. The current plan is to achieve a production capacity of 10,000 tablets per month. It is estimated that revenue will increase by 7-800 million after delivery, and production capacity of 30,000 tablets per month is expected to be achieved in the future. After the construction of the Beijing production line is completed, Celex Beijing will form complementary advantages with Sweden's Silex. Celex Beijing is responsible for providing the new production capacity that the MEMS business urgently needs and is close to the market, and Silex of Sweden is responsible for providing technical support to the initial startup customers necessary for Celex Beijing to introduce production lines in the early stages. The collaboration and complementarity between the two will strongly ensure that the company continues to maintain the leading position in pure MEMS foundry in the world.
Supported by the National Integrated Circuit Fund and driven by downstream enterprises, development opportunities have been ushered in. The National Integrated Circuit Fund has subscribed more than 1.2 billion dollars to invest in the “8-inch MEMS International Foundry Line Construction Project”. The 8-inch MEMS production line is one of the important tasks in the implementation of the national integrated circuit development plan. It is a strategic emerging industry promoted by the country. The future development of the company's MEMS business will continue to be supported by policies.
In recent years, domestic downstream companies' demand for MEMS products has continued to grow rapidly, and Nivey Technology has ushered in development opportunities.
Increase research and development, and develop navigation and avionics businesses collaboratively. In the first half of the year, the company's R&D expenses and management expenses rose sharply, up 96.84% and 34.37% respectively over the same period last year. There is a high level of collaboration between the avionics business and the inertial navigation business. The company's technology accumulation in inertial navigation equipment has laid a good foundation for the company to expand into other fields of avionics products.
Investment suggestions: The company's multiple production lines are upgraded/put into operation. After production capacity is put into operation, it is expected that production capacity will be rapidly absorbed. In the future, demand will be diversified downstream of the sensor circuit, demand will rise rapidly. The company will benefit fully from the expansion of production, and profitability will increase rapidly. We expect that in 19-21, the company will achieve net profit of 0.76/302/452 million yuan, with a target price of 31.16 yuan, giving it a “buy” rating.
Warning warning: the construction progress of new production lines falls short of expected risks, competition in the MEMS industry intensifies risks, demand from downstream enterprises falls short of expected risks, risk of drastic changes in exchange rates, and risk of large fluctuations in military orders