\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 66 Konfoong Materials International Co.Ltd(300666) )
Core view
The domestic substitution of targets is accelerated, and the market space is huge. Benefiting from the strong demand of downstream and national policy support, China’s sputtering target market has developed rapidly. In 2020, the scale of China’s semiconductor target market was about 1.7 billion yuan, with a year-on-year increase of 12.9%. From 2021 to 2026, the CAGR of China’s semiconductor target market was 10% – 15%. In 2026, China’s semiconductor target market reached 3.3 billion yuan.
Important customer orders were added, and target products continued to grow steadily. The company is the first manufacturer to develop metal targets in China and has international competitiveness in the field of ultra-high purity sputtering targets. In 2017, the company ranked second in the global ultra-high purity sputtering target market share of 13%. The company’s target products are used in wafer foundry, IDM, flat panel display, Cecep Solar Energy Co.Ltd(000591) battery manufacturing and many other fields. Customers include Semiconductor Manufacturing International Corporation(688981) , SunPower, TSMC, Lianhua electronics, Mitsubishi Chemical, etc.
Self developed high-purity metal to realize self supply of some raw materials. The direct materials of the company’s products account for more than 75% of the operating cost, including high-purity aluminum, high-purity titanium, high-purity tantalum and other high-purity metals. With the completion of the “production project with an annual output of 300 tons of electronic grade ultra-high purity aluminum” and the “industrialization project with an annual output of 400 tons of molybdenum sputtering target blank for flat panel display”, some raw materials can be supplied independently, so as to improve the stability of target quality and reduce the impact of raw materials on gross profit margin, and the gross profit margin is expected to increase.
The products are cost-effective and internationally competitive. The company’s technical indicators are not inferior to those of international target giants, as well as the cost advantage of Chinese manufacturing, and the product sales pricing has a competitive advantage. The company’s products are mainly exported, but China’s share shows an increasing trend. Considering that high-purity sputtering targets need to be installed on a special machine to complete sputtering, compared with foreign enterprises, the company has more popularity and geographical advantages in serving local customers, and China’s share is expected to grow further.
Accelerated volume of semiconductor precision parts and components. In 2020, Chinese mainland wafer manufacturers purchased over 1 billion US dollars of spare parts for 8/12 inch Road, and imported mainly. All kinds of newly developed semiconductor precision parts and components have accelerated large-scale production. Precision parts such as reactor spray head have been supplied in batches to a number of wafer foundry and semiconductor equipment manufacturers.
Investment advice
It is estimated that the company’s revenue in 2021, 2022 and 2023 will be RMB 1.59/24.7/3.67 billion respectively, with a year-on-year increase of 36.2% / 55.5% / 48.5%, and the net profit attributable to the parent company will be RMB 120 / 2.3/380 million respectively, with a year-on-year increase of – 15.3% / 83.3% / 65.5%, corresponding to the current share price PE of 114 / 62 / 38 times respectively. Considering the strong demand of the company in the field of metal targets and the development of semiconductor equipment parts, there is a large room for growth in the future, and the “buy” rating is given for the first time.
Risk tips
The risk of new product development, the risk of profit decline caused by scale expansion and R & D investment.
