\u3000\u3000 Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) (300316)
Event: on the evening of January 12, 2022, Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company in 2021 will be RMB 1.58-1.84 billion, with a year-on-year increase of 84% – 114%; The net profit after deduction of non parent company was RMB 1.52-1.77 billion, with a year-on-year increase of 85% – 116%.
Key investment points
The performance forecast for 2021 exceeded market expectations and met our expectations
Wind unanimously expects that the net profit attributable to the parent company in Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) 2021 will be RMB 1.595 billion, close to the lower limit of performance forecast. Soochow machinery has raised its expectation of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) net profit attributable to parent twice in 2021, which are as follows: (1) the mid-2021 report exceeded our expectation and raised the expectation of net profit attributable to parent in 2021 from 1.39 billion yuan to 1.57 billion yuan; (2) The orders exceeded our expectations. After announcing the orders of RMB 6.1 billion at the end of August, the net profit attributable to the parent company in 2021 was raised to RMB 1.714 billion, which was in the median of the performance forecast. In terms of Q4 alone, the net profit attributable to the parent company in Q4 was 470-730 million yuan, with a year-on-year increase of 41% – 119% and a month on month growth rate of – 7% to + 43%. Sufficient orders and high profitability promoted the company’s Q4 performance to still increase at a month on month rate.
The business elasticity of photovoltaic equipment is large, and the leader of long crystal equipment releases high performance elasticity
(1) increasing profitability under the scale effect. The scale effect of photovoltaic equipment is significant, and the net interest rate of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) 2021q3 exceeds 30%. With leading management ability, the net interest rate is expected to be further improved.
(2) capacity release corresponds to high performance elasticity. In the past two years, the company has been improving lean manufacturing & optimizing the supply chain, which can quickly digest orders in hand, release production capacity and transform it into performance flexibility.
(3) there are sufficient new orders in 2021, and there is strong certainty about the high growth of performance in recent two years. Photovoltaic is an industry with extreme PK cost. Customers generally choose the best equipment to help them reduce costs and increase efficiency, resulting in a high market share of the equipment leader. As the leader of China’s long crystal equipment, the company covers 80% – 90% of the market except Longji. The new orders signed in 2021 will exceed 20 billion yuan, 3.3 times that of the new orders signed in 2020 (about 6 billion yuan).
The equipment to material layout is at the right time and is expected to fully benefit from SiC import substitution
The key difficulty of SiC substrate fabrication lies in the long crystal. The long crystal furnace (substrate furnace) is the key to control the substrate growth quality. The equipment end + process commissioning end master more know-how. SiC substrates are dominated by Cree and other overseas manufacturers. According to yole, the total market share of 2020h1 China’s leading tiankeheda and Shandong Tianyue is less than 10% (sales caliber).
In October 2021, the company announced that it planned to invest 3.36 billion yuan to develop the silicon carbide material project to form 400000 conductive and semi insulating silicon carbide substrate wafers with an annual output of 6 inches and above, which successfully settled in Yinchuan on December 3. The company has successfully grown 6-inch conductive silicon carbide crystal and is in the process of third-party testing and downstream epitaxy verification. It has developed silicon carbide long crystal furnace, polishing machine, epitaxy and other equipment to build a platform company of equipment + materials and fully grasp the opportunities of silicon carbide volume and import substitution.
Profit forecast and investment rating: photovoltaic equipment is the first curve of Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) , the second curve is the volume of semiconductor large silicon wafer equipment, and the third curve is the full volume of sapphire materials and silicon carbide materials. We maintained the company’s net profit attributable to the parent company from 2021 to 2023 at rmb1714 / 2492 / 3.506 billion, 44 / 30 / 22 times the corresponding dynamic PE of the current stock price, and maintained the “buy” rating.
Risk tip: the downstream expansion progress of PV is lower than the market expectation, and the expansion of new products is lower than the market expectation.
