\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 16 Zhejiang Jingsheng Mechanical & Electrical Co.Ltd(300316) )
Event: the company released its annual report for 2021: in 2021, the company achieved a revenue of 5.961 billion yuan, a year-on-year increase of 56.44%. The net profit attributable to the parent company was 1.712 billion yuan, a year-on-year increase of 99.46%. The net profit after deducting non attributable assets was RMB 1.632 billion, with a year-on-year increase of 99.07%. The earnings per share was 1.33 yuan.
Event comments:
Revenue growth was in line with expectations, and orders on hand supported performance growth. In 2021, the company’s crystal growth equipment business realized an operating revenue of 3.475 billion yuan, a year-on-year increase of 32.47%; The operating revenue of intelligent processing equipment was 1.139 billion yuan, a year-on-year increase of 106.61%; Sapphire materials achieved an operating revenue of 389 million yuan, a year-on-year increase of 100.78%; The operating income of equipment transformation services was 362 million yuan, a year-on-year increase of 258.20%. The recognition of the operating revenue of the company’s crystal growth equipment depends on the production expansion plan of downstream silicon wafer manufacturers. Among the newly signed major contracts of RMB 13.165 billion announced in 2021, the revenue of RMB 771 million was recognized in 2021, resulting in the growth rate of crystal growth equipment being slower than that of other businesses during the reporting period. In 2022, the expansion of silicon wafer production will be further strengthened, which will drive the further growth of the company’s revenue. The company plans to achieve an operating revenue of more than 10 billion yuan in 2022. By the end of the first quarter, the company has not completed a total of 22.237 billion yuan of equipment contracts (year-on-year + 112.77%), which will strongly support this business goal.
The level of profit margin increased significantly year-on-year, and the company’s product power advantage was prominent. In 2021, the gross profit margin of the company’s sales was 39.73%, with a year-on-year increase of 3.13pct, and the net profit margin of sales was 28.99%, with a year-on-year increase of 6.64pct. When the price of raw materials rises and the gross profit margin of most companies in the mechanical equipment industry is under pressure, the gross profit margin level of the company has been significantly improved, which shows that the company’s products are highly competitive on the one hand and the company’s cost management ability on the other.
In 2022, semiconductor equipment orders are planned to exceed 3 billion yuan, opening a new growth curve. In 2021, the company did not complete the semiconductor equipment contract of 1.068 billion yuan. According to the annual report, the company will strive to sign new semiconductor equipment and service orders of more than 3 billion yuan in 2022. At present, the company has successfully developed long crystal, slicing, polishing and epitaxial equipment for 12 inch semiconductor silicon wafers. Among them, 12 inch single-sided thinning machine, 12 inch silicon epitaxial furnace and 12 inch vertical polysilicon deposition furnace have been verified by customers and sold. The equipment investment per unit capacity of 12 inch silicon epitaxial wafer is about 1900 yuan / wafer (annual capacity), of which the equipment investment in “polishing + epitaxy” accounts for more than 80% (polishing is about 60% and epitaxy is about 24%). Semiconductor equipment orders are expected to increase significantly, which will open the second growth curve.
Sapphire business is growing rapidly, and large-size substrates are sold. The operating revenue of sapphire business increased by 100.78% year-on-year, realizing leapfrog growth. In 2016, the company invested in the “production project of sapphire crystal rod with an annual output of 25 million mm” with funds raised from non-public offering of shares, which is expected to be put into operation by the end of 2022. A joint venture with Lens Technology Co.Ltd(300433) was established in 2020 to build a 3500 ton sapphire production capacity project. The first phase of the project was put into operation in December 2021 and is expected to reach full production in 2023. After the two projects are completed, the company will form an advantage in production capacity, and the improvement of scale effect will also improve the profitability of sapphire. At present, the company’s 8-inch sapphire substrate technology has been developed and sold. Large-size sapphire substrate will bring higher production efficiency and lower production cost. At the same time, it can improve the current state that China relies on imports for large-size substrate to a certain extent.
Investment suggestions:
We expect the net profit of the company from 2022 to 2024 to be RMB 2.833/37.10/4.608 billion and EPS to be RMB 2.20/2.88/3.58 respectively. The current share price corresponds to 21 / 16 / 13 times of PE. The company’s orders on hand have increased significantly. This year’s semiconductor equipment orders are expected to increase by more than twice. According to the company’s current business layout, the company will continue to grow driven by three curves of photovoltaic and semiconductor silicon wafer equipment, sapphire and silicon carbide in the next five years. To sum up, we believe that the company’s valuation still has some room to rise and maintain its “buy” investment rating.
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; The industrialization progress of mini / micro LED is less than the expected risk.
