Introduction to this report:
It is expected that 5G will greatly boost demand for GaAs substrates. InP is expected to benefit from the rapid release of optical communications. The company's second-generation semiconductor industry chain was laid out early, the volume is highly certain, and a reversal in performance is imminent.
Key points of investment:
The first coverage gave a rating for increasing holdings. It is expected that demand for GaAs substrates for mobile phones will increase dramatically in the 5G era, and InP is expected to benefit from the rapid release of optical communication. Both companies have a layout to promote second-generation semiconductors, and a long-term inflection point can be expected. The company's EPS for 2020-2022 is expected to be 0.03/0.12/0.23 per share, respectively, and the comprehensive PE and PB valuation methods give the company a target price of 13.8 yuan. Corresponding to PE480/115/60 times from 2020 to 2022, the current space is 38%, covering the first holdings increase rating.
Demand for GaAs substrates for mobile phones will grow rapidly in the 5G era. Compared to the second generation of semiconductors, the performance of the second generation of semiconductors is superior, and compared to the cost of the second generation of the third generation semiconductors, the second-generation semiconductor materials represented by GaAs may be the first to benefit in the 5G era: it is expected that the increase in the number of PAs in 5G phones, the increase in 5G penetration rate, and the application of VCSELs will greatly drive demand for GaAs substrates. We estimate that the demand for GaAs substrates for PA in 2025 will be about 2 million sheets (equivalent to 4 inches), corresponding market space of about 20 billion yuan, and a 5-year CAGR of about 17.5%; demand for GaAs substrates for VCSEL will be about 750,000 sheets (equivalent to 4 inches), corresponding market space of 1.12 billion yuan, and a 5-year CAGR of about 9.8%. However, at present, the GaAs penetration rate (PA and VCSEL) for domestic mobile phones is less than 10%, and there is huge room for import substitution, and domestic related companies represented by Cloud Germanium are expected to benefit first.
InP is expected to be released quickly, and order certainty is high. InP has high electron mobility, good radiation resistance, and a large prohibited band width. It has important applications in the field of optical communication. The company's 150,000-piece monocrystalline project is aimed at optical communication. Order certainty is high, profit potential is good, and production and release are imminent, which is expected to help the company's performance reach a long-term inflection point.
Catalysts: Rapid release of corporate GaAs and InP, rapid increase in the penetration rate of 5G phones Risk warning: the risk of 5G penetration falling short of expectations