\u3000\u3000 Suzhou Jinhong Gas Co.Ltd(688106) (688106)
Events
The company announced on February 8 that the company signed the “electronic bulk gas supply station construction and gas supply contract” with Guangdong core YUENENG Semiconductor Co., Ltd. with a contract amount of about 1 billion yuan (excluding tax) to supply general nitrogen, high-purity nitrogen, ordinary oxygen, high-purity oxygen, argon, hydrogen, helium, carbon dioxide Electronic bulk gases such as compressed air and high-pressure compressed air. It is expected to officially supply gas on August 31 this year, and the performance period will be September 30, 2042.
Key investment points
The company is expected to accelerate its growth by signing large orders for electronic bulk gas
(1) according to our calculation, the annual contribution income during the contract execution period is about 50 million, and the estimated net interest rate is 20% – 30%, corresponding to the net profit of 10-15 million / year, which will be 5% thicker than the company’s income in 2020 and 5% – 7.6% thicker than the net profit in 2020.
(2) wafer production requires dozens of electronic gases, and a single variety is usually supplied by several suppliers at the same time; However, electronic bulk gas is exclusively supplied and operated by only one supplier. We believe that the profitability of the on-site gas production project of electronic bulk gas will be significantly better than that of bulk gas, and the profit sustainability and cash flow will be significantly better than that of electronic specialty gas.
(3) electronic gas has high technical barriers and concentrated supply. According to the data of prospective industry research institute, in 2018, the five international giants accounted for more than 90% of the global market share of electronic gas for semiconductors, and the foreign giants accounted for nearly 90% of the Chinese market. This signing is another major breakthrough after the company signed a supply contract with North Jichuang company in November last year (the contract amount with North Jichuang company is about 1.2 billion yuan). On the one hand, it marks that the company’s ability has been recognized by more leading customers. At the same time, it also shows the company’s determination to realize the import substitution of China’s electronic gas.
(4) Guangdong core YUENENG Co., Ltd. is mainly engaged in the manufacturing and R & D of SiC chips in the field of vehicle specification and industrial control. With an investment of 9 billion yuan, the company will build an annual output of 240000 6-inch SiC wafers, becoming the largest vehicle specification SiC chip manufacturing enterprise in China. We believe that the contract is also conducive to the expansion of the company’s business in the field of new SiC chips and has a strong demonstration significance for the company to undertake other customers in the future.
With the continuous expansion of wafer capacity, the demand for electronic bulk gas is expected to continue to grow at a high rate
Wafer supply continued to fall short of demand, and wafer factories outside China expanded their production significantly. According to omdia statistics, by 2021, Q3 China’s wafer production capacity was 1.8467 million pieces / month and Semiconductor Manufacturing International Corporation(688981) was 665000 pieces / month. By 2024, the production capacity will be expanded to 2371800 pieces / month and Semiconductor Manufacturing International Corporation(688981) to 904700 pieces / month. According to SIA, the global share of semiconductor production in Chinese mainland will increase from 15% in 2020 to 24% in 2030. According to the statistics of Zhiyan consulting, China’s electronic special gas market was 13.28 billion yuan in 2018, of which the electronic special gas market for semiconductors was 8.5 billion yuan. We estimate that China’s semiconductor electronic bulk gas market is about 10 billion. With the significant expansion of wafer factories, demand will accelerate in the next few years. As one of the few electronic bulk gas suppliers in China, the company will fully benefit from the downstream expansion and import substitution of electronic gas.
Profit forecast and valuation
The company is a leading private gas company in China, with obvious technical advantages. The import substitution of electronic special gas is accelerated, and its development is expected to accelerate in the future. It is estimated that the company’s EPS forecast for 21-23 years is 0.45/0.73/1.16 yuan respectively, and the current price corresponding to PE is 59.60/37.11/23.23 times respectively, maintaining the buy rating.
Risk tips
Macroeconomic regulation exceeded expectations; The price of raw materials fluctuates greatly; The expansion of new fields did not meet expectations; Accounts receivable risk
