Report summary:
MEMS performance continued to grow rapidly, and military goods business delivery fell short of expectations. From January to September 2019, benefiting from the high level of prosperity in downstream biomedical, industrial and scientific, communications, consumer electronics and other application markets, the company's MEMS business, which has a global competitive advantage, continued to grow rapidly. The three-quarter report achieved revenue of 38,46784 million yuan, an increase of 35.67% over the same period last year, and the MEMS business continued to maintain strong profitability; however, due to delays in the finalization of some products, the production schedule of some orders fell short of expectations. The production schedule of some orders was adjusted, and the company's navigation and avionics business was adjusted during the reporting period There was a decline, and profitability declined. Among them, the situation improved in the third quarter; the third-generation semiconductor materials and devices, and unmanned systems business achieved positive breakthroughs at the market or technical level, but the short-term performance contribution was limited. At the same time, in order to better grasp market demand and opportunities, the company vigorously expanded related business, increased personnel recruitment, and guaranteed project investment. The company's management expenses increased accordingly during the reporting period, and R&D expenses rose sharply by 133.58% to 75.6942 million yuan. Sales expenses and financial expenses were better controlled.
The domestic MEMS market reached a record high in 2018, reaching nearly 42 billion dollars. The MEMS market is expected to grow significantly from 2019 to 2024, with a compound annual growth rate of about 8.3% in market revenue and a compound annual growth rate of about 11.9% in shipments. According to China Industry Information Network, the total MEMS market in China reached 42 billion yuan in 2017, a sharp increase of 20% over 2016. At the same time, it is predicted that by 2020, driven by the Internet of Things boom, China's MEMS market is expected to exceed 70 billion yuan, and the domestic MEMS production value growth rate is higher than that of the world.
Silex is leading the global MEMS foundry and has surpassed its performance. Silex has a very good sequence of processes. Silex takes processes common to the two business lines for production, which is one reason why Silex's gross margin is as high as 30%-40%. The cumulative “promised net profit” achieved by Silex in the three years 2015-2017 was SEK 171 million, accounting for 133.42% of the performance promised by the relevant restructuring transaction party of SEK 128 million, exceeding the promised amount of performance.
The MEMS production line was mass-produced in 2020, opening up new growth space for the company. As a representative of the MEMS domestic production line, the company invested 1.4 billion dollars in large funds. IDM is the only path for the development of the MEMS industry. Silex acquired by the company is the world's leading MEMS manufacturer. Its OEM business is in the top five in the world. It can rapidly improve China's technical strength in the MEMS field. At the end of 2018, an 8-inch line was added to increase production capacity by more than 50%. The 8-inch production line it opened in Beijing could reach the trial production stage in the third quarter of '19, and mass production is expected to be achieved in 2020. Currently, it is planned to achieve a production capacity of 10,000 pieces per month. It is estimated that full production will increase operating income by 7-800 million dollars. In the future, it is expected to achieve a production capacity of 30,000 pieces per month, which will be the mainstay of the company's performance and contribute to the localization of devices in fields such as national defense in China.
Profit forecast: New products and applications work together to ensure the sustainable development of the MEMS market. The total MEMS market in China reached 42 billion yuan in 2017, and it is predicted that by 2020, the Chinese MEMS market is expected to exceed 70 billion yuan. The Swedish company Silex, which was acquired by the company, ranked fifth among global MEMS foundries overall, with a gross margin of 30%-40%, far ahead of competitors. Furthermore, in 2015-2017, Sweden's Silex fulfilled its performance promise with an overall completion rate of 133.42% during the gambling period.
The Beijing production line is expected to achieve mass production in 2020. The initial target is to achieve a production capacity of 10,000 tablets per month, which is expected to increase the company's annual revenue by 7-800 million dollars. The ultimate goal is to achieve full production capacity of 30,000 tablets per month, and work with Selix to guarantee the company's leading position in MEMS in the world. The company's revenue for 19-21 is estimated to be 886 million, 1,209 million, and 1,633 million yuan, net profit attributable to the mother is 87 million, 133 million and 177 million yuan respectively, and EPS is 0.13 yuan, 0.21 yuan and 0.28 yuan respectively. The first coverage gave a “Highly Recommended” rating.
Risk warning: MEMS production capacity falls short of expectations