\u3000\u3 Bohai Water Industry Co.Ltd(000605) 358 Hangzhou Lion Electronics Co.Ltd(605358) )
Events
Hangzhou Lion Electronics Co.Ltd(605358) electronic release of the annual performance report for 2021: the company achieved an operating revenue of 2.541 billion yuan in 2021, with a year-on-year increase of 69.17%, and a net profit attributable to the parent company of 600 million yuan, with a year-on-year increase of 197.24%.
Key investment points
The performance of 2021 is in line with expectations, and the company is expected to develop at a high speed throughout the year
According to the company’s annual performance report in 2021, the company achieved an operating revenue of 788 million yuan in Q4 in 2021, a year-on-year increase of 67.86%, and the net profit attributable to the parent company in a single quarter was 196 million yuan, a year-on-year increase of 992.82%. The rapid growth of the company’s performance is mainly due to the support of national policies, the acceleration of domestic substitution of semiconductors and the continuous increase of downstream demand driven by the rapid development of clean energy, new energy vehicles and intelligent economy. In terms of products, the company’s semiconductor silicon wafers achieved a revenue of 1.459 billion, a year-on-year increase of 49.85%, a sales proportion of 58.12%, a gross profit margin of 45.45% (year-on-year + 4.8pct), and semiconductor power devices achieved a revenue of 1.007 billion, a year-on-year increase of 100%, a sales proportion of 40.12%, and a gross profit margin of 50.95% (year-on-year + 21pct). In terms of period expenses, the company’s control ability continues to improve. In 2021, the company’s period expense rate was 16.69% (year-on-year -1.48pct), of which the sales expense rate was 0.7% (year-on-year + 0.08pct), the management expense rate was 11.80% (year-on-year + 0.54pct), and the financial expense rate was 4.2% (year-on-year -2.09pct). The company’s operating cash flow was 438 million, with a year-on-year increase of 41.15%, and the company’s debt ratio was 34.39% (year-on-year – 26.2pct). The reason for the decrease was that the company improved the product structure, strengthened the cost control and timely raised the product price, resulting in a significant increase in revenue and a significant improvement in profitability. In addition, in 2021, the company’s R & D expenses were RMB 229.1 million, with a year-on-year increase of 104%, and the R & D expenses doubled year by year.
Based on the semiconductor wafer business, the volume and price rise under the condition of capacity shortage + domestic substitution
The company is a leading semiconductor silicon wafer enterprise in China. In terms of production capacity, the company laid out earlier and completed the construction of new production lines of 6-inch, 8-inch and 12 inch silicon wafers and realized full load operation. By the end of 2021, the company realized the production capacity of 12 inch silicon wafers with a monthly output of 15W Wafers / month, and the efficiency of production scale was significantly improved; In terms of products, after early customer expansion and product verification, the company’s 12 inch silicon wafer has covered more than 14nm technology node logic circuits, image sensing and power device chips cover all customers’ technology nodes and have been shipped on a large scale. The production and sales of 8-inch silicon wafer have been further expanded and the market share has been further improved; In terms of customers, the company has covered a stable customer base including international well-known multinational companies such as ONSEMI, AOS, Toshiba, Taiwan semiconductor and Taiwan Hanlei, as well as well-known Chinese companies such as Semiconductor Manufacturing International Corporation(688981) , Huahong Hongli, China Resources Microelectronics Limited(688396) electronics, Hangzhou Silan Microelectronics Co.Ltd(600460) and so on.
The expansion of foundry production is in full swing, and the continuous growth of capital expenditure drives the high demand for semiconductor silicon wafers. Semi expects the global semiconductor silicon wafer shipment area to reach 14 billion square inches in 2021, with a year-on-year increase of 13.9%. It is expected that the silicon wafer shipment area will be 14.9 billion square inches in 2022 / 2023 / 2024, with an increase of 6.4% / 4.6% / 2.9% respectively. At the same time, the supply of silicon wafer capacity is tight. Companies in the industry have raised the price of silicon wafer, which is expected to increase by up to 30%. In terms of industry structure, at present, the market monopoly of international giants is obvious. In particular, the localization rate of 12 inch silicon wafer in China is low, the supply is seriously insufficient, and the substitution space is broad. It is expected that under the dual resonance of capacity shortage and domestic substitution, China’s semiconductor silicon wafer industry is expected to usher in a simultaneous rise in volume and price in the future.
Power + RF two wheel drive, the company has significant advantages in the integrated layout of industrial chain
The company’s business extends to semiconductor power devices and compound semiconductor RF chips, creating an integrated industrial chain layout from silicon chips to devices / chips. In terms of power devices, the production and sales of the company’s vehicle scale power device chips and photovoltaic bypass diode control chips increased significantly in 2021. According to yole’s data, the power semiconductor device market will grow from US $17.5 billion in 2020 to US $26 billion in 2026, with an average annual compound growth rate of 6.9%; In terms of combined RF chips, the company’s subsidiary Leong Dongxin has built a capacity of 70000 GaAs RF chips per year and realized batch shipment. In addition, the company’s Haining base plans to layout 360000 RF chip products per year in the future. In the first half of 20202021, the company has developed more than 40 new customers while stabilizing its core customers, and the production and sales of RF chips have increased steadily.
We believe that while the company is based on the semiconductor silicon chip business, it will layout power devices and RF chips to create an integrated competitive advantage in the industrial chain. The concerted efforts of the three businesses are expected to drive the company to achieve sustained and rapid growth.
Profit forecast
It is predicted that the company’s revenue from 2022 to 2024 will be 3.797 billion yuan, 5.170 billion yuan and 6.511 billion yuan respectively, and the EPS will be 2.03, 2.60 and 3.17 yuan respectively. The corresponding PE of the current stock price will be 52, 40 and 33 times respectively, giving the “recommended” investment rating.
Risk tips
Risks such as the decline of overseas R & D progress and industry competition risk.
