\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 66 Konfoong Materials International Co.Ltd(300666) )
The mainland is the absolute leader in target materials, with excellent customer structure and rich product types. We will actively expand production and increase market share.
The target application field of the company is mainly semiconductor, supplemented by display and Cecep Solar Energy Co.Ltd(000591) battery. Semiconductor targets have entered the advanced node of 5nm. Aluminum targets, titanium targets and tantalum targets (accounting for nearly 70% of the total revenue) are widely used in chip manufacturing. Customers include TSMC, Semiconductor Manufacturing International Corporation(688981) , grosfande, micron and other domestic leading manufacturers. In terms of new products, HCM copper targets have won batch orders from world-class chip manufacturers, copper manganese alloy targets have won batch orders for the first time, and copper targets are expected to be in large quantities. In 2021, the company plans to raise funds and invest in semiconductor target production expansion projects, increasing the production capacity of aluminum, titanium, tantalum and copper targets by 70000. The semiconductor target market is US $1.5 billion, with overseas oligopoly and Cr4 reaching 80%. According to the calculation, the market share of the company is close to 10%. The company serves high-quality customers at home and abroad, has a wide range of products and actively expands production. It will enjoy the double dividend of global semiconductor market growth + domestic substitution, and the market share is expected to be further improved.
The layout of upstream high-purity metal raw materials, and the profitability of the target can be expected in the future.
The raw material of the target is high-purity metal, which is the core cost of the target. In the past, the company mainly relied on imports of high-purity metal, and the direct material cost accounted for more than 70%. The company arranged the upstream raw materials through joint-stock companies and raised investment projects. According to the data, the proportion of the purchase amount of affiliates among the top five suppliers increased from 3.9% in 2017 to 9.3% in 2020. The self-sufficiency rate continued to improve, and the profitability is expected to improve.
Develop semiconductor components and bring new growth momentum.
Semiconductor components were laid out in 2017. At present, they are divided into two categories: metal parts and CMP products. In terms of metal parts, at present, the company’s products include parts for PVD / CVD / etching machine. The products are gradually introduced to mainland customers. The certification cycle of parts is shorter than that of target materials, and it is expected to produce large quantities faster. It is estimated that the global semiconductor parts market will exceed US $30 billion in 2022 and the mainland semiconductor parts market is expected to exceed RMB 10 billion in 2025. At present, the core parts are mainly monopolized by the United States and Japan, the localization rate in the mainland is very low, and the friction between China and the United States catalyzes the willingness of customers to replace. In the future, the company’s products will support the demand in the mainland and provide new growth momentum for the company. In terms of CMP products, the company’s products include polishing pads, retaining rings, polishing pad dressers and CMP head services for 12 inch wafers. They have been mass produced and sold in many wafer factories and equipment factories and have developed rapidly. The global polishing material market exceeds US $2 billion. The company’s CMP products will continue the domestic substitution logic and help the company’s revenue growth.
The core team has profound technical background and the company attaches importance to talents, laying a solid foundation for opening up Xinjiang and expanding its territory.
Yao Lijun, the founder and chairman of the board, is one of the core technical experts who master ultra-high purity targets in the world. General manager Jiepan and other core members have deep technical background, technical backbone cooperation for many years and stable relationship. The company issued the first phase of equity incentive plan in 2019 and the second phase of incentive plan in 2021 to continue to motivate employees; At the same time, the core technical talents hold shares in the affiliated companies of Jiangfeng. The technical talents spread their branches and leaves around the target business, which is a solid support for the company to explore new fields and new products.
Investment advice
We expect the company’s operating revenue to be RMB 2.43 billion and net profit to be RMB 220 million and RMB 360 million respectively in 2022 and 2023, and the corresponding PE valuation to be 66 / 41 times. Considering that the company is the absolute leader of target materials in mainland China, and the superposition of parts and components opens up more than ten times the growth space, it is expected to fully benefit from the development of global semiconductor industry and domestic substitution opportunities. At the same time, it has both scarcity and growth, and is rated as “buy” for the first time.
Risk tips
The progress of parts business is less than expected, the progress of self-made raw materials upstream of the target is less than expected, the progress of target production expansion is less than expected, the risk of price rise of metal raw materials, the risk of high overseas proportion of the company’s business, the risk of deviation in industry scale calculation, and the risk of lagging information.
