Incidents:
On August 14, the company released its 2023 annual report. According to the announcement, 2023H1 achieved revenue of 1,342 million yuan, YoY -14.22%; realized net profit of 174 million yuan, YoY -65.49%; realized net profit of 50 million yuan after deducting non-attributable net profit of 50 million yuan, YoY -89.00%.
Short-term performance is under pressure, and 23Q2 has improved significantly from month to month:
Affected by overcapacity and weak demand in the industry, industry sentiment declined, and the company's performance was under pressure in the short term. Looking at a single quarter, 23Q2 achieved revenue of 710 million yuan, YoY -12.17%, QoQ +12.30%; net profit of 139 million yuan, YoY -47.51%, QoQ +304.25%; net profit after deducting non-return net profit of 27 million yuan, YoY -88.00%, and QoQ +12.95%. The year-on-year decline in the company's Q2 performance narrowed, and the month-on-month improvement was significant. Overall performance declined in the first half of the year. The main reason was that market demand had not yet picked up, sales orders declined, and prices of some products were lowered. Q2 The gross margin for a single quarter was 25.13%, QoQ-4.54 pcts, net interest rate 17.42%, and QoQ+14.53 pcts. The main reason for the month-on-month increase in net interest rate was that the company achieved other income and total net investment income of 103 million yuan. In terms of expenses, the company's Q2 sales expenses/management expenses/R&D expenses/financial expenses ratios were 0.96%/4.07%/9.33%/7.47%, respectively. Sales, management, and financial expense ratios have all increased, mainly due to the company's increase in sample fees, expansion of business scale, confirmation of share payments, and accrual of interest on convertible bonds.
Semiconductor silicon wafers have entered the bottom cycle, waiting for the industry to recover:
Semiconductor silicon wafers have entered the cyclical inventory adjustment stage. Starting from 2022Q4, due to the decline in demand for storage and consumer electronics, the global semiconductor silicon wafer shipping area has gradually declined, and the industry boom has been weak. According to WSTS forecasts, the global semiconductor market is expected to be $515 billion in 2023, down 10.3% year over year. According to SEMI data, semiconductor silicon shipments in the first half of 2023 were 6.596 billion square inches, of which Q2 shipments were 3.331 billion square inches, an increase of 2% over the previous year, showing signs of recovery for the first time. In the first half of 2023, the company's semiconductor silicon wafers achieved revenue of 755 million yuan, YoY -18.48%, and the capacity utilization rate of silicon polishing wafers declined. Among them, Q2 achieved revenue of 402 million yuan, QoQ +13.97%, a year-on-month recovery. Benefiting from the relative stability of the automotive and industrial application markets, demand for power semiconductors has driven the company's silicon epitaxial wafer production capacity utilization rate to remain high. In terms of production capacity, the company's production capacity for 12-inch silicon wafers at its Quzhou base is still climbing; it acquired Jiaxing Jinruihong in March 2022, and production capacity is in the process of climbing. We believe that as the industry gradually enters the bottom reversal stage, the company's semiconductor silicon business is expected to continue to pick up.
Power devices are progressing smoothly, and the RF business is growing steadily:
Benefiting from stable demand for clean energy and new energy vehicles, the company achieved strong production and sales of power devices.
23H1's semiconductor power devices achieved revenue of 538 million yuan and YoY -10.69%, of which Q2 achieved revenue of 280 million yuan and QoQ +8.37% in a single quarter. The company focuses on the two major fields of photovoltaics and vehicle regulations, continuously optimizes the product structure and enriches product categories. At present, the proportion of the company's FRD products has been steadily increasing. IGBT products have successfully completed technical development, passed verification by some customers, and entered the small-batch supply stage. In terms of the RF business, the company's RF chip verification progress has basically covered mainstream mobile phone chip design customers in China. Ongoing orders have increased rapidly, and losses have narrowed.
Investment advice:
We expect the company's operating income from 2023 to 2025 was 3.467 billion yuan, 4.191 billion yuan, and 4.952 billion yuan, respectively, net profit of 588 million yuan, 858 million yuan, and 1,069 million yuan, EPS of 0.87 yuan, 1.27 yuan, and 1.58 yuan, corresponding to PE 39 times, 26 times, and 21 times. Taking into account the prosperity of the semiconductor industry and the company's business situation, based on the EPS being 1.27 yuan in 2024, 35 times PE was given, the target price for six months was 44.45 yuan, and the investment rating of Buy-A was maintained.
Risk warning: industry demand falls short of expectations; market competition risk; technology iteration risk.