\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 460 Hangzhou Silan Microelectronics Co.Ltd(600460) )
Ping An View:
IDM’s leading capacity advantage is gradually showing, and its profitability is marginally improved: the company was founded in September 1997 and listed on the main board of Shanghai Stock Exchange in March 2003. After more than 20 years of development, the company has grown into one of the largest IDM semiconductor enterprises in China, realizing the leap of “from 5 inches to 12 inches”. Its products cover integrated circuits, power devices, power modules, MEMS sensors, optoelectronic devices and compound chips. Especially in terms of power, MOSFET, IGBT single transistor and modules have achieved large-scale sales, and IPM module shipments are leading in China, building a core competitiveness. Thanks to the rapid growth of downstream multiple demand, the rise of industry shortage and price, the company’s own early technology accumulation, the release of production capacity and the adjustment of product structure, the company’s revenue and net profit maintained a high-speed growth trend, and the performance began to increase rapidly. In 2021, the revenue reached 7.194 billion yuan, a year-on-year increase of 68.07%; The net profit attributable to the parent company reached 1.518 billion yuan, a year-on-year increase of 214525%; The gross profit margin and net profit margin reached a new high of 33.19% and 21.10% respectively, with marginal improvements in profitability and cash flow.
With power application system as the core, multi-point layout of product line: in 2020, the global market scale of power semiconductor devices and modules was US $20.9 billion, Infineon occupied a leading position with 19.7% market share, and the top ten power semiconductor manufacturers in the world were foreign companies. In the market segment, Hangzhou Silan Microelectronics Co.Ltd(600460) has emerged, ranking 10th in the power MOSFET discrete device Market (2.2%), 10th in the IGBT discrete device Market (2.6%) and 9th in the IPM module Market (1.6%), with certain competitive advantages. At the same time, in terms of power IC, the fast charging chipset for smart phones and the series of multi protocol fast charging solutions for travel charging, mobile power supply and vehicle charging developed by the company have been applied in Chinese mobile phone brand manufacturers. In addition, the company has also laid out MEMS sensors, and acceleration sensors have been widely used in smartphones of most Chinese mobile phone brand manufacturers.
The company is about to enter the harvest period: the company has laid out and invested in the production line construction in advance, step by step. After the accumulation period, the production capacity is released at the right time, and the company has benefited significantly from the shortage and rising price tide. At the same time, the company actively promotes the adjustment of product structure and seizes the opportunity to enter the head customers in the high threshold market. The adjustment and optimization of output structure and the progress of clients in the high-end market interact and complement each other, forming a positive feedback and virtuous circle. The product performance is constantly upgraded and benchmarked with large foreign manufacturers. The biggest difference between the company and other manufacturers in the same industry lies in the combination of devices and circuits, which can provide supporting solutions for key customers, so as to establish integration advantages and enhance customer stickiness. Therefore, on the one hand, it can provide customers with multiple supporting products to form a one-stop solution to meet customers’ diversified needs and differentiated choices; On the other hand, all business lines can also develop together to provide themselves with relevant resources and production capacity. The company has long focused on the characteristic process, based on the gradually mature process platform to develop products close to the needs of customers and provide localization services. In the future, the company will continue to focus on the layout of relevant peripheral products along the road of high-end chips in the direction of power system application, pay close attention to the time window of shortage in the industry, expand its advantages in design, R & D, production, manufacturing and packaging, and accelerate the entry into high threshold industries.
Investment suggestion: the company is a comprehensive IDM leading enterprise in China’s semiconductor field. It takes the application of power system as the core to layout power devices, modules, circuits and other products. The product group is rich, and the product performance and quality are comparable to those of large foreign manufacturers. At the same time, the company actively develops large customers in the high-end market, and continuously optimizes the product structure, customer structure and output structure. With the steady release of high-grade production line capacity, the company’s long-term stable and abundant capacity advantage is further highlighted. We believe that with the rapid growth of the downstream energy industry in 2021, the profitability of the company will continue to increase significantly and the profitability of the downstream industry will continue to improve in 2021. We expect that the company’s EPS from 2022 to 2024 will be 1.05 yuan, 1.43 yuan and 1.79 yuan respectively, and the PE corresponding to the share price on April 27 will be 38.1x, 28.0x and 22.3x respectively. We are optimistic about the long-term growth of the company. We will cover it for the first time and give it a “recommended” rating.
Risk tips: (1) downstream demand may be less than expected: if the epidemic or core shortage dilemma is not solved or even exacerbated, it may lead to the contraction of downstream industry demand and the growth of company revenue and profit may be adversely affected; (2) Risk of intensified market competition: IGBT is a power semiconductor subdivision track with high technical threshold, which has high requirements for technology, product quality and service. Once the company’s technical level, product quality and service quality decline, the company’s market share may be robbed; (3) Risk of insufficient capacity: the company adopts IDM mode, which has higher capital expenditure than fabless. If the company’s capacity utilization or customer expansion can not keep up with the market, the performance growth may be adversely affected.
