\u3000\u3 Bohai Water Industry Co.Ltd(000605) 358 Hangzhou Lion Electronics Co.Ltd(605358) )
Hangzhou Lion Electronics Co.Ltd(605358) mainly engaged in 6 / 8 / 12 inch semiconductor silicon polishing wafer / epitaxial wafer (accounting for 57% of the revenue in 2021), power devices (Schottky diode + MOSFET, 40%) and gallium arsenide chip OEM (1%). The company covers many upstream and downstream production links in the semiconductor industry, such as silicon single crystal drawing, silicon polishing wafer, epitaxial wafer, discrete device chip and discrete device finished products.
The prosperity of the silicon wafer industry continues, and the company’s 12 inch volume increases rapidly: after the semiconductor silicon wafer shipment experienced a trough in 2019, the shipment volume accelerated in 20-21 years. The high capital expenditure of downstream wafer factories drives the growth of silicon wafer demand, and the expansion of silicon wafer factories lags behind. It is expected that the silicon wafer production capacity will continue to be in short supply in 202223, and sumco, the world’s second largest silicon wafer factory, is expected to increase the price until at least 2024 Hangzhou Lion Electronics Co.Ltd(605358) is a leader in the technology of heavily doped silicon wafers in China. Its downstream customers include Semiconductor Manufacturing International Corporation(688981) , Huahong Hongli, China Resources Microelectronics Limited(688396) electronics, Hangzhou Silan Microelectronics Co.Ltd(600460) and other well-known wafer factories. By the end of 2021, the company has built a production capacity of 150000 pieces / month of 12 inch silicon wafers, which is expected to increase rapidly in 2022. In March, the company spent 1.5 billion yuan to acquire 78% shares of Guojing semiconductor and improve the layout of 12 inch light doped wafers of the company. We expect the company’s silicon wafer business revenue to be 2.43 billion yuan from 2022 to 23, with a year-on-year increase of 61% / 39%.
New energy vehicles and photovoltaic drive the growth of the company’s power devices: the company’s power device products mainly include Schottky diode chips, finished products and MOSFET chips, which are mainly used in photovoltaic, automotive electronics and other fields. The company has strong competitiveness in subdivided fields, accounting for 45% of the global share of Schottky diodes for photovoltaic. The company’s vehicle related power devices have passed the certification of Bosch / Mainland, benefiting from the rapid growth of downstream demand for a long time. At present, the short supply of power devices has not been alleviated, or the price has been further increased. It is expected that the revenue growth rate of power devices in 202223 will be 27% / 20%.
Active layout of compound semiconductors to further open up growth space: gallium arsenide is mainly used in RF field at present, and its application in 3dsensing, automobile lidar and other fields is expected to gradually increase in the future. At present, the company’s subsidiary Leong Dongxin has built a foundry manufacturing capacity of 70000 pieces / year of GaAs RF chips and started batch shipment. At the same time, the company’s Haining base is expected to form a capacity of 360000 pieces / year for the construction of GaAs / silicon carbide based gallium nitride and VCSEL chips.
Investment advice
It is estimated that the company’s revenue from 2022 to 2024 will be 4 / 54 / 6.3 billion yuan, with a year-on-year increase of 59% / 36% / 16%; The net profit attributable to the parent company was 9.5/12.8/1.45 billion yuan, with a year-on-year increase of 59% / 35% / 13%, corresponding to 50 / 37 / 33 times of PE. 60 times PE in 2022. The reasonable valuation of the company in 2022 is 57 billion yuan, corresponding to the share price of 125 yuan. It is covered for the first time and rated “buy”.
Risk tips
The downstream customers’ verification and penetration do not meet the expected risk; Industry competition intensifies; Price fluctuation of raw materials; Risk of falling price of power devices; Risk of lifting the ban on restricted shares.
