Affected by the sharp increase in sales of semiconductor materials, infrared germanium and photovoltaic germanium, the company's 2020 net profit rose 138.3% year-on-year, of which the fourth quarter net profit growth was as high as 128.1%. With Huawei's shareholding contributing to the rapid growth of production and sales of gallium arsenide / indium phosphide semiconductors, the warming of germanium prices and the continuous improvement of the company's product structure, the company's performance has entered a period of rapid growth. Give the company a list price of 12 yuan and maintain a "buy" rating.
The performance was in line with expectations, and the net profit of homing in 2020 rose 138.3% compared with the same period last year. The company achieved an operating income of 670 million yuan in 2020, + 60.1% year-on-year, and a net profit of 23 million yuan, + 138.3% over the same period last year. Among them, Q4 achieved a net profit of 14 million yuan in a single quarter, + 128.1% compared with the same period last year. Reasons for the significant increase in performance in 2020:
1) the sales volume of all major products increased compared with the same period last year, increasing operating income / gross profit by RMB 189,000,000; 2) sales / management expenses in 2020 compared with the same period last year-13.8% RMB10.3%, a total decrease of RMB 7.28 million. It is estimated that the company's 2021Q1 will achieve a net profit of 0.13 billion to 0.19 million yuan, mainly due to a large increase in government subsidies.
With the rebound of germanium prices, the production and sales of deeply processed products increased greatly, and the gross profit of the traditional germanium plate increased by 158%. The price of germanium rose from a seven-year low of 6650 yuan / kg in mid-February to 7100 yuan / kg at the end of the year. Driven by the increase in germanium demand driven by 5G construction and the recovery of the global economy, germanium price rebound material will continue. In 2020, the company's photovoltaic / optical fiber / infrared (blank and coated mirror) germanium production and sales ratio is the same as + 279.8%, + 279.8%, 15.2%, 38.5%, 38.5%, 220.2%, of which infrared germanium and photovoltaic germanium, driven by demand, the company's sales and gross profit increased significantly, and the overall gross profit of the germanium plate increased by 158% to 95 million yuan.
Huawei bought a stake in Xinyao to help semiconductor materials drive performance higher. On December 10, 2020, Hubble Technology, a wholly owned subsidiary of Huawei, increased its capital to Xinyao Semiconductor by 30 million yuan and held a 23.91% stake after completion.
Huawei's stake will open up the cooperation between the material side and the product side, and promote the production capacity to reach the sales volume. In 2020, the company sold 149,000 gallium arsenide + indium phosphide single crystals (equivalent to 4 inches), a year-on-year increase of 108.2%. The company now has a production capacity of 800,000 gallium arsenide and 100000 indium phosphide. Benefiting from the independent control of the semiconductor industry chain and the growth of the scale of basic materials, we expect the company to sell 15660,000 pieces (equivalent to 4 inches) of semiconductor materials in 2022, corresponding to a CAGR of 64%, which is expected to become a major growth point in the future.
Risk factors: germanium prices fluctuate, sales of germanium products fall short of expectations, and sales of gallium arsenide and indium phosphide fall short of expectations.
Investment advice: germanium prices continue to pick up, the company's product structure is increasingly optimized, sufficient production capacity of gallium arsenide semiconductors, with Huawei's stake, production and sales will show a rapid growth trend. However, affected by the decline in the rights and interests of the semiconductor sector (70% to 53.26%) and the downward assumption of infrared germanium / photovoltaic germanium sales (6 tons / 284 000 in 2021 to 3 tons / 205 000 in 2021), we downgrade the company's homing net profit forecast of 0.61 million yuan in 2022 (the original forecast is 105.00 million yuan), and the additional 2023 net profit is forecast to be 210 million yuan. The corresponding EPS predictions are 0.09, 0.20, 0.32 yuan respectively. Give the company a list price of 12 yuan, corresponding to the 2022 PEx60, and maintain the company's "buy" rating.
