Tianyue advanced (688234)
Investment logic
The demand trend of silicon carbide is clear, and the layout of China’s industrial chain is accelerated: 1 Compared with silicon carbide, silicon carbide has the advantages of lower switching loss and conduction loss, high voltage resistance and high temperature resistance. 2. Semi insulating substrates are mainly used for communication base stations and radars. The demand benefits from the growth of market scale of gallium nitride RF devices. It is expected that the shipment will increase from 166000 pieces in 2020 to 438000 pieces in 2025, with a compound growth rate of 21.5%. Due to the overseas embargo, there is a strong demand for import substitution. 3. Conductive substrates are mainly used for power devices in electric vehicles, new energy and other fields. Compared with IGBT, silicon carbide devices have the advantages of reducing vehicle power consumption, reducing module volume and reducing the use of passive devices. The demand for electric vehicle inverter, OBC and DC-DC is increasing rapidly. It is expected to usher in a “singularity moment” to replace IGBT in 2025. It is expected that the market scale of silicon carbide power devices will increase from US $2.2 billion in 2022 to US $6 billion by 2026. 4. At present, China is accelerating the layout in all links. In the substrate links, Tianyue advanced, Tianke Heda, Sanan Optoelectronics Co.Ltd(600703) , shuoko crystal and other companies have certain competitive advantages.
Three core drivers of the company’s growth: 1 From semi insulating type to electrical type. In 2020, the company’s global market share of semi insulating substrates was 30%. At the same time, 6-inch conductive substrates had been sent to many well-known customers, and won the procurement plan of State Grid. The raised funds were mainly used for the production capacity construction of 6-inch conductive substrates. 2. The cost continued to decline driven by multiple factors such as the improvement of yield, the improvement of long crystal efficiency and equipment localization, so as to improve the gross profit margin. The yield of crystal rod increased from 41% in 2018 to 49.9% in the first half of 2021, the long crystal cycle decreased from 8 days to 7 days, and the localization rate of equipment such as long crystal furnace and direct raw materials such as silicon powder continued to improve. 3. Capacity improvement in the context of demand determination. In 2020, the company’s 4-inch semi insulating substrate production capacity will be 48000 pieces / year, and 300000 pieces / year 6-inch conductive new production capacity will be formed after the completion of the raised investment project. It is expected to be trial production in 2022 and reach production in 2026.
Investment advice
First coverage and “buy” rating: we expect the company’s revenue to be 520 million yuan, 590 million yuan and 960 million yuan respectively from 2021 to 2023, and the net profit attributable to the parent company to be 80 million yuan, 91 million yuan and 110 million yuan respectively. At present, the industry is in a period of rapid expansion and there are few profitable companies. Therefore, we use the PS method for valuation. With reference to the peer valuation level, we give the company 30 times PS in 2023, corresponding to the stock price of 67.2 yuan.
Risk statement
The risk of highly relying on a single customer, the risk that the conductive substrate cannot achieve profitability at the initial stage, the risk of phased overcapacity in the industry, and the risk of gap between technology and global industry giants.
