\u3000\u3000 Wuxi Nce Power Co.Ltd(605111) (605111)
As a leading power device design enterprise in China, its profitability continues to rise: the company was established in 2013 and listed on the main board of Shanghai Stock Exchange in 2020. Since its establishment, the company has always focused on the design of semiconductor power devices. It is one of the first enterprises in China to master the superjunction theory and technology and mass produce shielded gate power MOSFET and superjunction power MOSFET. The company has a complete range of products, which are widely used in consumer electronics, automotive electronics, industrial electronics, new energy vehicles / charging piles, intelligent equipment manufacturing, Internet of things, 5g, photovoltaic new energy and other fields. At present, it has many well-known customers in downstream industries, including ZTE, Foxconn, Contemporary Amperex Technology Co.Limited(300750) , Midea, Guangzhou Shiyuan Electronic Technology Company Limited(002841) , Great Wall Motor Company Limited(601633) , bull electric appliance and so on. In recent years, the company’s revenue and net profit attributable to the parent company have maintained rapid growth. From 2016 to 2020, the operating revenue increased from 422 million yuan to 955 million yuan, and the compound annual growth rate of revenue reached 17.74%; The net profit attributable to the parent company increased from 36 million yuan to 139 million yuan, and the compound annual growth rate of net profit reached 31.02%. In the first three quarters of 2021, the company’s operating revenue reached 1.099 billion yuan, a year-on-year increase of 65.05%; The net profit attributable to the parent company reached 311 million yuan, a year-on-year increase of 207.83%, and the gross profit margin reached a record high of 38.9%.
The downstream demand for power semiconductors blossoms at many points, and the domestic substitution process is accelerating: power semiconductors are the core of electric energy conversion and circuit control of electronic devices, which can improve energy conversion efficiency and reduce power loss. Among them, MOSFET and IGBT have relatively high technical threshold and are the mainstream power devices in the market and the strongest growth in the future. In 2020, the global market scale of power semiconductor devices and modules will be US $20.9 billion. Infineon occupies a leading position with a market share of 19.7%. The top ten power semiconductor manufacturers in the world are foreign companies. On the demand side, in recent years, the vigorous development of many emerging application fields such as new energy vehicles, new energy power generation, smart grid and rail transit has brought broad development space to the industry, superimposed with the shortage of supply capacity. At present, there is a shortage and rising price of overseas imports, the market supply exceeds demand, and the contradiction between supply and demand in China is becoming increasingly prominent. Customers in relevant industries downstream of the industrial chain have strong willingness to import substitution. Chinese leaders with core technical strength, product quality, cost-effective advantages and production capacity usher in an excellent customer introduction window period. The progress of product introduction is accelerated, and the process of domestic substitution is expected to accelerate.
With the continuous improvement of product matrix, IGBT is expected to become a new driving force for growth: the company has diversified product matrix, rich series models, wide application market coverage and many leading customers in various industries. The company has formed a mutually beneficial and win-win relationship with high-quality suppliers in the upstream of the industrial chain. It is one of the semiconductor power device design companies with the largest chip investment of 8-inch and 12 inch process platforms in China, and the overall production capacity continues to grow. The company accelerates product upgrading and new product development, continues to promote the R & D and industrialization of high-end power MOSFET, IGBT and other products, optimizes the market structure, customer structure and product structure, and develops emerging markets and key customers. As the company’s key development direction, IGBT has officially started sales, which is expected to provide new growth power for the company and become a new performance growth point. Recently, the company has also decided to raise additional funds for the third generation semiconductor, power drive IC, IPM module and power integration module, so as to enrich product categories and strengthen core competitiveness.
Investment suggestion: the company is a leading semiconductor power device design enterprise in China. It has perfect layout in high-end power devices, rich product series and models, wide application market coverage, many leading customers in various industries, and relevant production capacity is guaranteed. With its advantages, the company will fully benefit from the opportunities of high industry prosperity and domestic substitution, continue to expand in application market and customers, and continue to maintain rapid growth in business. We expect that the company’s EPS from 2021 to 2023 will be 2.90 yuan, 3.60 yuan and 4.44 yuan respectively, and the PE corresponding to the share price on January 14, 2022 will be 55.3x, 44.6x and 36.2x respectively. We are optimistic about the follow-up development of the company and give it a “recommended” rating for the first time.
Risk tips: (1) downside risk of industry prosperity: if the macroeconomic downturn or downstream demand is less than expected, the company’s revenue and profit growth may be adversely affected. (2) Risk of intensified market competition: MOSFET and IGBT are power semiconductor devices with high technical threshold. Once the company’s technology, product and service quality are reduced, they may be robbed of market share by competitors. (3) Risk of insufficient capacity: if the capacity of the company’s main suppliers is seriously strained or the relationship between the two parties deteriorates, the company’s performance may be adversely affected.
