\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 16 Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) )
Focus on core technology competitiveness and continuously expand the capability circle. Many of the company’s main founders have master’s or doctor’s degree background or teaching experience in Zhejiang University. The founder team and management team with technical background have laid the development main line of taking technology as the core competitiveness of the company. At the technical level, on the one hand, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) continuously improves the technical level of crystal silicon growth equipment, introduces new products to meet the development needs of the industry, and improves the competition in photovoltaic and semiconductor industries. On the other hand, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) makes forward-looking technical reserves for crystal growth equipment of sapphire, silicon carbide and other materials by virtue of its understanding of crystal growth technology. For the crystal growth technology of new materials, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) has the concept of “R & D generation, mass production generation and reserve generation”. The company developed sapphire and silicon carbide crystal growth technology in 2012 and 2018 respectively.
Make forward-looking judgment on industry trends and have the courage to invest against the trend. Since its establishment, the company has carried out two equity financing (the third round is in progress and has not been completed), IPO in 2012 and non-public offering of shares in 2016. The funds raised are used to expand the capacity of single crystal furnace and sapphire respectively. When the industry was at the bottom of the cycle in 2012 and the company’s operating income decreased significantly, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) expanded its production capacity through IPO Financing and ensured the stability of cash flow. 2016 was a cyclical low point in the sapphire industry. The gross profit margin of China’s major sapphire enterprises fell to a cyclical bottom in 2016. The sapphire production capacity invested by Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) increased its market share rapidly after this cycle.
Excellent supply chain management ability and industrial chain position. From 2016 to 2020, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) the turnover rate of accounts payable decreased from 4.06 to 2.03, and the corresponding turnover days of accounts payable increased from 88.73 days to 177.62 days. It shows that the company’s ability to occupy the funds of suppliers is gradually improving and has a strong position in the upstream. From the perspective of cash flow, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) the proportion of operating cash inflow in operating income is increasing, indicating that the company has high quality of revenue and low risk of bad debt. On the whole, the debt level of the company is low, and the asset liability ratio of the company in 2020 is 49.98%. More than 95% of all liabilities are current liabilities. In current liabilities, accounts payable and accounts received in advance are the most important parts. On the one hand, the strong industrial chain position ensures the stability of the supply chain, on the other hand, it greatly reduces the risk of bad debts.
“Production expansion + upgrading of old production lines” helped Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) photovoltaic equipment revenue to achieve leapfrog growth from 2021 to 2023. We predict that the demand for “production expansion + equipment upgrading” of photovoltaic silicon wafer industry from 2021 to 2023 will be 166gw, 199.6gw and 154.55gw respectively Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) occupies the largest market share in the industry competition. As of September 30, 2021, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) has outstanding orders of 17.76 billion yuan. Considering its delivery cycle and revenue confirmation cycle, photovoltaic equipment will provide sufficient growth power for it from 2022 to 2023.
Semiconductor equipment is another growth pole of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) . According to our statistics, the unfinished and unfinished projects of 8-inch and 12 inch silicon wafers are 850000 pieces / month and 2230000 pieces / month respectively. Based on this calculation, the future market space of semiconductor silicon wafer crystal drawing link will reach 4.501 billion yuan, and the future market space of equipment link of polishing and epitaxy process Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) is 12.558 billion yuan. On October 26, 2021, the company announced that it planned to raise funds by private placement to invest in “12 inch integrated circuit large silicon wafer equipment test line project” and “production and manufacturing project of 80 sets of semiconductor material polishing and thinning equipment per year”. The completion of the project will help Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) form technical and efficiency advantages in the field of 12 inch silicon wafer and consolidate its leading position in the field of semiconductor silicon wafer equipment in China.
Sapphire material: standing at the starting point of a new cycle. From a historical point of view, the periodic fluctuations of sapphire industry and LED chips are highly correlated. Mini LED / micro LED will drive the prosperity of LED chips in this round. We predict that the sapphire demand brought by sapphire substrate from 2021 to 2025 will be 126.22 million mm, 140.76 million mm, 155.04 million mm, 171 million mm and 188.75 million mm respectively (converted into 2-inch substrate).
Sapphire‘s advanced production capacity layout helps Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) ride the wind. 2016 Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) non-public offering of shares raised funds to invest in “25 million mm sapphire crystal rod production project (hereinafter referred to as” Inner Mongolia project “),” 25 million mm sapphire production project expansion project “and” 12 million sapphire cutting, grinding and polishing project “, The “production expansion project of sapphire production project with an annual output of 25 million mm” was changed to “Sapphire cutting, grinding and polishing project with an annual output of 6 million pieces” in October 2021. In addition, the company and Lens Technology Co.Ltd(300433) established a joint venture in 2020 to build an annual output of 3500 tons of sapphire (hereinafter referred to as “Ningxia project”). The first phase of the project will be put into operation in December 2021. It is expected that all Ningxia projects will reach production capacity in 2023. At that time, the company’s Sapphire production capacity is expected to reach 4800 tons / year, forming a capacity advantage.
New energy vehicles and 5g communication promote the rapid growth of silicon carbide market. Casa predicts that by 2025, the global demand for silicon carbide substrates (converted to 6 inches) for new energy vehicles will reach 624000 pieces, and the demand in China (converted to 6 inches) will reach 286000 pieces. According to yole’s prediction, the global demand for semi insulating silicon carbide substrates will reach 438400 by 2025. It is estimated that the market scale of conductive silicon carbide substrate driven by new energy vehicles in the world and China will be 4.056 billion yuan and 1.859 billion yuan respectively, and the market scale of semi insulating silicon carbide wafer in the world will reach 3.288 billion yuan.
Investment suggestions:
We expect that the company’s EPS from 2021 to 2023 will be 1.34, 1.89 and 2.32 yuan respectively, and the corresponding P / E will be 44, 31 and 25 times respectively. At present, the latest median price earnings ratio (TTM, overall method, excluding negative values) of other special machinery industries is 46.80 times. The company is a leading company in the photovoltaic silicon wafer equipment industry, and the company will fully benefit from this round of silicon wafer expansion. In terms of semiconductor silicon wafer equipment, the company has completed the full coverage of core processing equipment in four links: crystal drawing, slicing, polishing and epitaxy. The 12 inch equipment has been verified at the client and partially shipped. Sapphire business will benefit from the improvement of LED chip prosperity brought by mini / micro led, which is expected to grow rapidly in the future. Silicon carbide business has completed technical reserve and formed purchase intention with customers. According to the company’s current business layout, in the next five years, the company will continue to grow driven by three curves: photovoltaic and semiconductor silicon wafer equipment, sapphire and silicon carbide. To sum up, we believe that the company’s valuation still has some room to rise, so we give it a “buy” rating for the first time.
Risk tips:
The expansion of photovoltaic silicon wafer is less than the expected risk; The expansion of semiconductor silicon wafer is less than the expected risk; Risk that the industrialization progress of mini / micro LED is less than expected; Silicon carbide capacity construction is less than expected risk.
