\u3000\u3000 Konfoong Materials International Co.Ltd(300666) (300666)
The company is a leading semiconductor target company in China, specializing in the R & D and production of ultra-high purity metal materials and sputtering targets. Its main products include aluminum targets, tantalum targets, titanium targets, semiconductor equipment parts, etc. it has successively undertaken a number of national strategic development, scientific research and industrialization projects, including National 02 major projects and national 863 major projects, It fills the gap in this field in China. Through years of technology accumulation, the company has become a target supplier of well-known manufacturers at home and abroad such as Semiconductor Manufacturing International Corporation(688981) , TSMC, BOE and SunPower. Due to the long certification cycle and high customer certification barriers in this industry, once it passes the supplier qualification certification of downstream manufacturers, the two sides will maintain a long-term and stable cooperative relationship.
The target market scale continues to expand. The company expands production capacity and seizes the opportunity of domestic substitution. The target is mainly used in semiconductor, Cecep Solar Energy Co.Ltd(000591) , display panel and other fields. In 2021, the global target market was close to US $20 billion, of which the semiconductor target market was about US $1.6 billion in 2020. Overseas companies such as Nippon metal, Honeywell and other sputtering target manufacturers dominate by virtue of first mover advantage. In 2019, Nippon metal’s market share was as high as 30%, making it the world’s largest target supplier. As the world’s major semiconductor and panel production base, China has an urgent demand for domestic substitution of targets. As a leader in China, the company has been at the leading level in the industry for aluminum targets and titanium targets, and the breakthrough of tantalum targets and copper targets is also accelerating. The company successively launched convertible bonds and fixed increase fund-raising projects in 2021 to further expand the production capacity of panels and semiconductor targets, In the future, we will fully enjoy the domestic alternative dividend.
The autonomy of raw materials continues to make breakthroughs, which will improve the gross profit margin of the company in the future. Ultra high purity metals are the upstream raw materials of the target, accounting for more than 70% of the cost. China’s high-purity metals mainly rely on foreign imports. In order to ensure the independent control of the supply chain, the company has launched a comprehensive layout in the field of upstream raw materials, and has realized the independent supply of high-purity aluminum and titanium materials. Copper and tantalum are also in the process of autonomy. With the further localization of raw materials, the company will not only obtain greater guarantee in terms of supply chain security, but also increase its gross profit margin in the future.
The layout of semiconductor equipment parts and consumables has a broad space for the second growth curve. The global market scale of semiconductor parts is about 30 billion US dollars in 2022. At present, the localization level of semiconductor equipment parts and consumables in China is very low, and the United States and Japan are in a monopoly position. The company is committed to the localization of semiconductor equipment parts and components, and the layout of CVD spray heads, semiconductor equipment cavities, polishing pads, etc. its business has the same customer base and similar technical foundation as the semiconductor target business, with significant synergy. The company’s products have been supplied to Naura Technology Group Co.Ltd(002371) , Shenyang tuojing and other head semiconductor equipment companies. We expect that the company’s semiconductor parts business is expected to achieve a revenue of 450 million yuan in 2022, with huge growth space in the future.
The investment proposal benefits from the growth of target market scale and the trend of localization substitution. The target business of the company will maintain rapid growth. The layout of semiconductor equipment parts by the company will further open the second growth curve. We expect the company to achieve operating revenue of RMB 1.59 billion, RMB 2.54 billion and RMB 3.7 billion from 2021 to 2023, with a year-on-year increase of 36.3%, 59.8% and 45.7% respectively; The net profit attributable to the parent company was 120 million yuan, 200 million yuan and 380 million yuan, with year-on-year changes of – 15.2%, 62.6% and 86.7% respectively; The current share price corresponds to the PE of 115, 71 and 38 from 2021 to 2023, which is recommended for the first time.
The risk indicates the risk of declining prosperity of semiconductor and the risk that the promotion of new products and projects of the company is not as expected.
