\u3000\u3000 Hangzhou Lion Electronics Co.Ltd(605358) (605358)
Core view
Event: the company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company will reach 590-640 million yuan in 2021, with a year-on-year increase of 192% to 217%. It is estimated that the net profit not attributable to the parent company will reach 547-597 million yuan in 2021, with a year-on-year increase of 264% to 297%.
The silicon wafer industry is booming, and the company leads the domestic substitution: in 2021, the company’s production lines are operating at full capacity, the sales orders are full, the production and sales of main products are greatly increased, and the price of products is increased. The price of silicon wafer is expected to keep rising in 2022: 8-inch silicon wafer increased by about 10% and 12 inch silicon wafer increased by 15% in 2022 signed by sumco, Xinyue and other manufacturers with customers. The company continues to expand the scale of cooperation with customers, further enlarges the production and sales of 8-inch silicon wafers, and further improves the market share; 12 inch silicon chip customers continue to develop, and the technical capacity has covered more than 14nm technical nodes, logic circuits, image sensing and power device chips cover all customers’ technical nodes, and large-scale shipments have been made. At present, the localization rate of 12 inch silicon wafer is at a low level. The company takes the lead in the technology of heavily doped silicon wafer. It plans to realize the production capacity of 150000 pieces / month of 12 inch silicon wafer by the end of 2021. In the future, it will further expand the production capacity, which is expected to lead the domestic substitution of large-size silicon wafer.
New energy vehicles and photovoltaic drive the performance improvement of power devices: the company’s power device products are mainly used in automotive electronics, photovoltaic and other fields. In 2021, the production and sales of the company’s vehicle specification power device chips and photovoltaic bypass diode control chips increased significantly. In the future, automobile electrification will continue to drive the demand for power semiconductors, and the increase of photovoltaic installed capacity will also drive the demand for supporting power devices. The supply of power devices is in short supply, the delivery date will continue to be extended, or the price will be further increased. The company has strong competitiveness in subdivided fields, accounting for 35% of the global share of photovoltaic special SBD. It will benefit from the rapid growth of downstream demand in the long term and the improvement of profitability brought by rising prices in the short term.
Actively layout compound semiconductors to further open up growth space: GaAs is mainly used in RF field at present, and its application in 3D camera, automobile lidar and other fields is expected to be gradually expanded in the future. At present, the company’s subsidiary Leong Dongxin has a foundry manufacturing capacity of 70000 GaAs RF chips / year. Meanwhile, the company’s Haining base is also under planning and is expected to form a production capacity of 360000 pieces / year.
Profit forecast and investment suggestions
We raised the company’s earnings per share forecast for 21-23 years to 1.30, 1.97 and 2.80 yuan (the original forecast for 21-23 years was 1.27, 1.96 and 2.80 yuan, mainly raising the revenue forecast of power devices and lowering the forecast of government subsidies for 21 years). Considering that the localization rate of large-size silicon wafers is still at a low level and the company has broad growth space in the future, we choose the absolute valuation method (FCFF), Give the company a target price of 161.03 and maintain the buy rating.
Risk tips
The prosperity of silicon wafer industry is lower than expected; The downstream demand of power devices is less than expected; Localization progress is less than expected; The business expansion of compound semiconductor is less than expected; Capacity deployment and construction were not as expected.
