Main points of investment:
The operating income of Shengong shares in the third quarter was 128 million yuan,-12.11% compared with the same period last year; the net profit belonging to shareholders of listed companies was 44 million yuan, year-on-year-35.54%; and deducting 42 million yuan from non-net profit, an increase of-39.11% over the same period last year. Q3 net profit is slightly lower than expected.
Q3 gross profit margin 51.01%, month-on-month increase in 0.4pct, year-on-year decline in 14.6pct, mainly due to a sharp rise in the cost of polysilicon raw materials. The global market for semiconductor silicon materials will be US $12.62 billion in 2021. The capacity construction speed of overseas mainstream silicon material manufacturers can not meet the growing demand downstream, and the supply of silicon wafer products is less than the demand. Coupled with the upstream raw material costs caused by inflation, the long-term wafer supply agreement unit price of mainstream silicon material manufacturers will rise by about 30% in 2022.
Consolidate the leading position of superior products, and increase the proportion of large diameter silicon materials of more than 16 inches. Shengong Co., Ltd. mainly uses monocrystalline silicon materials for etching equipment upper and lower electrodes and outer rings, etc., as the core consumables in the production process, located in the upper reaches of the industrial chain, strongly affected by the periodicity of semiconductors. The market size of large-diameter silicon materials for etching equipment is about 400-500 million US dollars, which is mainly used to make silicon electrodes in plasma etching equipment, and the market size of silicon electrodes is about 10-1.5 billion US dollars. Shengong core team has more than 20 years of overseas experience, the company's magnetic field-free large diameter monocrystalline silicon manufacturing technology, solid-liquid coexistence interface control technology, thermal field size optimization technology and other technologies have been in the international advanced level. The production size of etched silicon material reaches 19 inches, and the 22-inch product is successfully developed in 2020, which is in the leading level in the world. In 2021, sales of large-diameter silicon products totaled 460 million yuan, an increase of 151 percent over the same period last year, of which more difficult products with more than 16 inches accounted for 26.32 percent, an increase of 176 percent over the same period last year.
In the silicon parts plate, it is expected to become the leading company of silicon electrodes in China. In 2021, the company opened the layout of two factories in the north and south of Quanzhou, with the ability of the whole industry chain from etching silicon materials to silicon electrodes. The company cooperates with the silicon parts products developed by the original factory of domestic etching machine equipment, several 12-inch model material numbers have been certified and small batch supply has been realized.
Starting from the ultra-low deficiency of 8-inch silicon wafers, we will welcome the capacity climbing period in 2022. The IPO investment project will increase the annual output of 1.8 million 8-inch semiconductor polishing wafers and 360,000 semiconductor companion wafers. On January 18, 2021, the first batch of 8-inch semiconductor wafers officially went offline and a monthly production line of 50,000 wafers was built. The 2021H2 8-inch test wafer has passed the evaluation certification of some domestic customers. The 8-inch light-doped low-defect high-resistance silicon wafer is progressing smoothly in the client-side evaluation.
The product structure has changed from one to three, and the proportion of domestic customers has increased. As the major global manufacturers of plasma etching machines and etching silicon electrodes are located in Japan, Korea and the United States, the main customers of Shengong include Mitsubishi Materials, SK Chemistry, CoorsTek, Hana and other international enterprises. Since 2019, the company has gradually expanded its domestic semiconductor foundry and equipment customers, and the proportion of domestic revenue has increased from 1.9% to 14.43% in 2021.
Downgrade earnings forecast and maintain "buy" rating. Due to a significant reduction in gross profit margin due to rising costs, the 2022-23 homing net profit forecast was lowered from 3.33,390,000,000 yuan to 18,000,000 PE 32X, much lower than the 2023 average PE 64X of the semiconductor materials sector, maintaining the "buy" rating.
Risk tips: semiconductor business cycle downward, new product expansion is not as expected, yield climbing is not as expected.