Sanan Optoelectronics Co.Ltd(600703) (600703)
Conclusions and recommendations:
Thanks to the rapid expansion of the production and marketing scale of compound semiconductors, the revenue and profit of the subsidiary San’an integration recorded a significant increase in the first three quarters, and its profitability also increased significantly compared with the same period of last year. In addition, the company’s compound semiconductor production capacity layout in Hunan has basically taken shape. We expect that the company’s compound semiconductor output value will account for more than 30% in 2022.
In the long run, there is a strong demand for compound semiconductors in the fields of automobile, photovoltaic and communication. As an early enterprise in this field in China, the company is in a leading position in China in terms of materials and device manufacturing, and is expected to fully enjoy the development dividend of the industry. We estimate that the net profit of the company in 2021 and 2022 will be RMB 2.236 billion and RMB 3.084 billion respectively, yoy will increase by 120% and 38%, and EPS will be RMB 0.50 and RMB 0.69 respectively. At present, the stock price corresponds to 52 times of pe52 in 2022, giving a buy rating.
The growth momentum of compound semiconductor business is sufficient: thanks to the demand for compound semiconductor in the fields of electronic power and communication, the subsidiary San’an integration realized a revenue of 1.67 billion yuan in the first three quarters, yoy increased by 152%, and the gross profit margin was 36.2%, an increase of 16.5 percentage points over the same period of last year, The substantial growth in revenue and significant improvement in profitability promoted San’an integration to achieve a net profit of 400 million yuan in the first three quarters, reversing losses year-on-year; In addition, the phase I project of Hunan San’an semiconductor base with a total investment of 16 billion yuan was officially put into operation, with a production capacity of 6 inches and 30000 pieces / month. With the explosion of new energy vehicles and 5g communication demand, silicon carbide will further appear with its advantages of high heat dissipation, small size, low energy consumption and wide band gap. It is expected that the output value of Hunan base will reach 12 billion yuan after it is fully completed and reached, which is expected to continue to drive the upgrading of the company’s product structure. Looking forward to the future, the compound semiconductor industry has become a key industry supported by the state. There is no doubt about its strategic position. The advantageous layout of San’an in this field will help to improve its performance and valuation in the long term.
1-3q21’s performance grew significantly: 1-3q21 achieved a revenue of 9.53 billion yuan, and yoy increased by 61.5%; The net profit was 1.29 billion yuan, with yoy increasing by 37%,. Among them, due to the rapid growth of compound semiconductor business, 3q21 San’an integration revenue was 650 million yuan, yoy increased by 128%, and the proportion of revenue increased to 19%, driving the company to achieve revenue growth of 46.5% to 3.42 billion yuan in a single quarter in the third quarter, net profit of 400 million yuan, yoy increased by 32.6%, net profit of 310 million yuan after deduction, yoy increased by 39.7%. In terms of gross profit margin, the comprehensive gross profit margin of 3q21 company was 24.5%, an increase of nearly 3 percentage points month on month.
Profit forecast: Based on comprehensive judgment, we estimate that the net profit of the company in 2021 and 2022 will be RMB 2.236 billion and RMB 3.084 billion respectively, yoy will increase by 120% and 38%, and EPS will be RMB 0.50 and RMB 0.69 respectively. At present, the stock price corresponds to 52 times of pe52 in 2022, giving a buy rating.
Risk tip: the demand for compound semiconductor is less than expected, and the recovery of LED boom is less than expected.
