Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) (300316)
Event: according to WeChat official account of the company, the first crystal of 3500 tons of industrial sapphire manufacturing and processing project was successfully launched in December 3, 2021, marking the launch of the world’s largest industrial sapphire production base in Ningxia. At the same time, the project with an annual output of 400000 pieces of silicon carbide semiconductor materials was successfully located in Yinchuan.
Key investment points
At the right time of SiC layout, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) extends from the equipment end to the material end
In October 2021, the company announced that it planned to invest 3.36 billion yuan to develop the silicon carbide material project, including a fixed increase of 3.134 billion yuan to form 400000 conductive and semi insulating silicon carbide substrate chips with an annual output of 6 inches and above. The silicon carbide project was the largest “Puzzle” in the strategic layout of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) building high-end semiconductor material plate, and successfully settled in Yinchuan on December 3. Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) the research in the field of the third generation semiconductor material silicon carbide has lasted for many years. It has possessed the long crystal technology and wafer processing technology of 6-inch silicon carbide. It has successfully developed equipment such as silicon carbide long crystal furnace, polishing machine and epitaxy, built a platform company of equipment + Materials, and fully grasped the opportunities of silicon carbide volume and import substitution.
The key difficulty of SiC substrate lies in long crystal and wide space for import substitution
SiC power devices are widely used in white electricity, new energy vehicles, photovoltaic and other scenarios, in which the substrate cost accounts for 47%, which is the main cost source of SiC devices. The key difficulty in its fabrication lies in the long crystal, including the accurate control of air flow and temperature, Long crystal furnace (substrate furnace) is the carrier of crystal preparation and the key to controlling substrate growth quality. The know how is mostly controlled at the equipment end + process commissioning end. At present, the market of silicon carbide substrate is dominated by overseas manufacturers, and the market share of Chinese enterprises is small. Silicon carbide substrate needs long-term process technology accumulation, and there are high technical and talent barriers. According to yole, SiC substrate will be in the first half of 2020 In, wolfspeed (a wholly-owned subsidiary of Cree) accounted for 45% of the market, and the combined market share of China’s leading tiankeheda and Shandong Tianyue was less than 10%.
The company is a master of long crystal technology and is expected to benefit from SiC import substitution
Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) make use of the advantages of long crystal technology to play a steady role in the field of silicon carbide. On the one hand, the company can extend the advantages of the existing photovoltaic long crystal technology to the field of silicon carbide long crystal, and the underlying principles of air flow, temperature and other control technologies are interlinked; On the other hand, the company selects a variety of technical routes for simulation verification of long crystal technology, and pays more attention to the long-term competitiveness of improving yield and expanding and thickening crystals, rather than short-term radical expansion of production capacity.
The company has 6-inch SiC long crystal technology and wafer processing technology, and has developed SiC long crystal furnace, polishing machine, epitaxy and other equipment; According to the fixed growth plan, the company is setting up a pilot production line from raw material synthesis – crystal growth – cutting, grinding and polishing, and has grown 6-inch conductive silicon carbide crystals. Through internal testing, the main performance meets the requirements of industrial grade wafers in the industry, and third-party testing and downstream epitaxial verification are carried out. In the future, the company will fully benefit from SiC volume and import substitution opportunities by virtue of its own technical advantages.
Sapphire has a large potential application space, and cost reduction in scale is the key
Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) is a leading supplier of sapphire materials in China. Sapphire has limited expansion in new application fields in the past five years, mainly in the field of LED and small-size cover plates of consumer electronics, such as mobile phone cameras and wearable devices. In addition, with the rapid expansion of production capacity, the decline of terminal price superimposed on the rapid decline in profits brought by the accelerated expansion of production capacity, the market space of the whole sapphire industry is less than expected by the company. In the long run, sapphire crystal is expected to be successfully used in high-end consumer electronics applications such as mobile phone covers. In September 2020, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) and Lens Technology Co.Ltd(300433) established a joint venture Ningxia xinjingsheng electronic materials to carry out sapphire manufacturing and processing business. Lansi is the leading manufacturer of cover glass in China. With the help of Lens Technology Co.Ltd(300433) , the company cuts into the field of consumer electronics and can quickly expand the downstream demand space. When the cost and price of sapphire fall below the zero point, large-scale batch applications will naturally occur. At that time, the market space brought by sapphire is expected to become a Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) large profit growth point. The successful production of the first batch of crystals of the project with an annual output of 3500 tons in Ningxia Xinjing marks the official production of the world’s largest industrial sapphire production base, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) the new Sapphire production capacity is an advanced production capacity, which is expected to further promote the cost reduction process of sapphire application in the field of consumer electronics.
Profit forecast and investment rating: photovoltaic equipment is the first curve of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) , the second curve is the volume of semiconductor large silicon wafer equipment, and the third curve is the full volume of sapphire materials and silicon carbide materials. We maintained the company’s net profit attributable to the parent company from 2021 to 2023 at rmb1714 / 2492 / 3.506 billion, 51 / 35 / 25 times the corresponding dynamic PE of the current stock price, and maintained the “buy” rating.
Risk tip: the downstream expansion progress of PV is lower than the market expectation, and the expansion of new products is lower than the market expectation.
