domestic silicon carbide substrate leader. Founded in 2010, the company initially focused on 4-inch semi-insulated substrates. After more than ten years of technological development, the 6-inch conductive silicon carbide substrate has been sold in batches, and the high-quality 8-inch conductive silicon carbide substrate has been prepared by independent diameter expansion.

800V SiC intensive car, the prospect is optimistic. Semi-insulating and conductive silicon carbide substrates are widely used in the fields of new energy vehicles/photovoltaic/energy storage and 5G/radar/national defense, respectively. Since Tesla took the lead in carrying SiC on Model 3 in 2018, car companies such as Weilai/BYD/Geely/SAIC/Xiaopeng have followed suit. According to incomplete statistics in the GaN World Report, as of 2023H1, nearly 40 SiC models have entered mass production and delivery in the world. A total of 1.187 million SiC models can be found in the first half of the year. Combined with CleanTechnica statistics (over 1 million SiC models from January to May) and the sales volume of major models in June, it is estimated that the global sales volume of SiC models in the first half of the year exceeded 1.2 million, and the high-pressure silicon carbide models are being heavily loaded.

capacity adjustment completed, the company's performance is now turning point. With the rapid growth of terminal market demand, the company's conductive substrate products into Infineon, Bosch and other major enterprises, in hand orders abundant. On the one hand, the company speeds up the construction of Shanghai Lingang conductive substrate production capacity, on the other hand, the Jinan plant semi-insulated substrate production capacity actively adjusted to conductive substrate production capacity. Although the company's operating income and profitability in 2022 will temporarily decline due to the adjustment of production lines and equipment, with the smooth climbing of the company's port production lines, the delivery capacity of conductive products has been improved, and the company's sales volume has achieved continuous growth for five consecutive quarters, with 0.825 billion yuan reaching a record high in the first three quarters of 2023. The net profit attributable to the parent 2023Q3 realized a turnaround of 3.8 million yuan in a single quarter.

investment advice: the company is the domestic silicon carbide substrate leader, the product has a high technical barriers. At present, the company is in the stage of technological breakthrough and rapid capacity climb, overlay downstream demand to stimulate the company and industry leaders to sign cooperation orders, market share is gradually expanding. We expect the company to achieve operating income of 12.48/21.50/3.692 billion yuan in 2023-2025. As the company's 2023-2025 revenue is expected to grow rapidly and profits are turning around, the corresponding PS is 22.63/13.14/7.65 times, covering for the first time, giving an "overweight" rating.

Risk Warning: Downstream industry demand is less than expected; capacity expansion is less than expected; technology research and development is less than expected.