According to Securities Star News, on November 15, 2024, Shengong Co., Ltd. (688233) announced that the company would accept institutional research on November 13, 2024, including Zhou Xiaoqi of Nuoan Fund, Lu Weicheng of Zhongyu Fund, Ren Siru of Yongying Fund, Zhu Xiaoyu of China Europe Fund, Ye Wenqiang of Huatai Insurance, Cao Xuchen of Huabao Fund, Liu Yuchen of HSBC Jinxin, Chen Chun of China Universal Fund, Wu Wenji Zhai Yimeng of China Post Securities, Zhang Dawei of Guosen Securities, Sun Ke Liu Yang of Qianhe Fund, Li Junhai of Minsheng Jiayin, and Duan Zhongzhe of Taikang Assets, Zhang Yanming of Yinhua Fund, Yang Weiwei, Chen Weiwen, Chu Wenyu, Liao Hanbo, Zhang Jie, Han Lin of Great Wall Fund, Shen Zheqiang of Xinrong Development, Sun Quan and Wang Shuai of Wells Fargo Fund, and Liu Tijin of Industrial Fund participated.

The details are as follows:

Q: The incremental market space for the large-diameter silicon materials business

A: The large-diameter silicon material business is the core business of the company since its establishment, and it is the main source of operating income and profit, and it is in a leading position in the global market segment in terms of both production capacity and technology. Since 2024, the business has cut into the capacity expansion and utilization rate improvement of advanced process chips in overseas markets through overseas silicon component manufacturing plant customers, and indirectly benefited from the continuous huge investment of overseas technology giants in the field of artificial intelligence, so the performance has been warm, and the market space for existing applications in the future still has the opportunity to continue to expand.

The Company also noted the following incremental changes in the market

1. At present, the high-end product categories of the two main product types of memory chips, DRM and NND Flash, such as HBM and eSSD, are developing along the technical route of vertical stacking in order to meet the high-performance needs of artificial intelligence. In order to establish a signal connection, the amount of deep hole etching process (TSV) in the pre-chip manufacturing process is increased accordingly. On the other hand, in the advanced packaging process of the back-end packaging process, especially the CoWoS (Chip on Wafer on Substrate) packaging process, it is also necessary to etch the silicon interposer in order to establish the connection between various chips. Therefore, from a qualitative point of view, the amount of plasma etching will increase, becoming an incremental market demand for large-diameter silicon materials business;

2. With the rapid expansion of China's local integrated circuit manufacturing capacity in recent years, especially the capital expenditure and stock capacity of domestic storage manufacturers represented by Yangtze River Storage and Changxin Storage, the shipment and operation of domestic plasma etching machines have been stimulated, and the incremental market demand for large-diameter silicon materials business has been driven;

3. With the advanced process logic chip circuit characteristic line width moving towards 2nm, the front-end process is more sensitive to particle and impurity contamination in the cavity of the plasma etching machine. Therefore, the demand for replacing the original non-silicon parts with monocrystalline silicon or polycrystalline silicon has increased, and higher requirements have been put forward for ultra-large diameter silicon materials, driving the incremental market demand for large diameter silicon materials business.

At present, the overseas large-diameter silicon material market has not yet fully recovered. The company's large-diameter silicon material production capacity is leading in the world, with sufficient room for output improvement, and has the ability to meet the downstream market demand generated after the future prosperity of the semiconductor industry.

Q: Gross profit margin of large-diameter silicon material business

The gross profit margin of the company's large-diameter silicon materials business mainly benefited from cost-side optimization.

According to the "Question 2 on gross profit margin" of the announcement "Jinzhou Shengong Semiconductor Co., Ltd.'s Reply Announcement on the Shanghai Stock Exchange" disclosed by the company on May 11, 2024, the amount of high-purity polysilicon purchased and stored by the company in 2022 and 2023 will be 104.2556 million yuan and 1.6991 million yuan respectively, and the average purchase price will be 254.70 yuan/kg and 283.19 yuan/kg respectively. The company's 2023 production polysilicon and other raw materials are mainly purchased from 2022.

Since the beginning of this year, with the increase in warm orders in the downstream market, the company's output of large-diameter silicon materials has continued to increase month-on-month, and the consumption rate of original polysilicon raw materials has accelerated and approached safety stock. Therefore, the company has purchased market-priced polysilicon on demand, and the cost side continues to be optimized.

At present, the price of high-purity polysilicon raw materials is still in the historically low range, and the increase in operating rate has diluted the unit cost of products, and the production yield of new products has increased significantly. In summary, the gross profit margin of the company's large-diameter silicon materials business is expected to continue to maintain a steady improvement trend.

Q: Progress of large-size semiconductor wafer business

According to the latest third-quarter data from global semiconductor wafer manufacturers SUMCO and GlobalWafers, the global semiconductor wafer market has a high inventory and a slower inventory consumption rate and falling prices, except for a few applications strongly related to artificial intelligence. According to SEMI data, the global semiconductor wafer shipment area is expected to decrease by 2% in 2024. Therefore, the market price and space of domestic semiconductor wafer manufacturers have been further squeezed, and they are generally facing greater operating pressure.

In view of the current industry situation, the company's management has adopted a positive and pragmatic business strategy for the large-size semiconductor wafer business, and the positive film products are still in the evaluation and verification stage in mainstream manufacturers. In addition to verification in mainstream manufacturers, the company also implements customized research and development according to the needs of some characteristic process manufacturers, obtains evaluation and certification opportunities and orders, and the price is more favorable than that of ordinary products, laying the foundation for further obtaining emerging niche markets with higher domestic gross profits.

The company's 8-inch lightly doped polished silicon wafer production capacity has relatively few domestic competitors, and large foreign manufacturers are reducing production, so it has a certain market space. In the future, the company will continue to adopt a positive and pragmatic business strategy according to the actual market situation, reduce the loss of the business under the current market conditions, promote evaluation and certification, and strive to achieve breakeven as soon as possible.

Q: The incremental market space of the silicon parts business

Answer: The silicon parts business is a new business that the company relies on the original large-diameter silicon material business and naturally extends to the downstream, which is sold to the Chinese domestic market and has grown rapidly in recent years. This is mainly due to the huge investment in China's local integrated circuit production capacity, which has driven the original shipment of downstream domestic plasma etching machines, which correspondingly boosted the company's shipments as an OEM of silicon parts and the incremental market of silicon parts; In addition, China's local integrated circuit manufacturers have benefited from the warm market of household appliances consumption in the domestic market, and the operating rate has continued to increase since the beginning of this year, which has boosted the silicon parts stock market.

According to the third quarter report recently disclosed by SMIC and Huahong Hongli, the leading domestic foundries, the operating rate has reached about 100%; Domestic storage manufacturers' DDR4 and consumer-grade SSD and other bulk memory chip products have also begun to affect the international market structure, and the operating rate and production capacity have increased greatly.

The high capital expenditure and high operating rate of China's local integrated circuit production capacity, as well as the R&D investment of domestic plasma etching machine manufacturers to catch up with the international advanced level, are expected to bring continuous demand, which is conducive to the rapid development of the company's silicon parts business.

Q: Gross profit margin of silicon parts business

In FY2023, the gross profit margin of the company's silicon parts business has reached and exceeded the long-term average of Korean manufacturers in the same industry. On the one hand, this is because the company has strong integrated technical strength and customized development capabilities from crystal to processing, and on the other hand, it has also benefited from the excellent product structure under the wave of localization, and has made a unique contribution to China's integrated circuit manufacturing. At present, the company has sufficient orders in hand and is actively expanding production, and will strive to ensure a high yield rate with higher delivery volumes, and strive to continue to maintain the gross profit margin level since 2023.

Q: Epitaxial development

Answer: The company noted that since the issuance of the "Six Mergers and Acquisitions", there have been a number of mergers and acquisitions in the semiconductor materials industry, most of which are asset injections by major shareholders under the same control.

According to the development history of the international semiconductor materials industry, high-quality enterprises need to achieve faster growth acceleration through epitaxial development while doing a good job in connotative development, and the company is no exception. Under the premise of continuously consolidating the main business, the company will actively explore cooperation opportunities in the industry at home and abroad, pay attention to asset quality and synergy of the main business, and promote the development of extension in a solid and steady manner, so as to bring better returns to shareholders.

Shengong Co., Ltd. (688233) main business: R&D, production and sales of large-diameter silicon materials, silicon parts, semiconductor large-size silicon wafers and their application products.

According to the third quarter report of Shengong Co., Ltd. in 2024, the company's main revenue was 214 million yuan, an increase of 79.65% year-on-year; the net profit attributable to the parent company was 27.486 million yuan, an increase of 166.71% year-on-year; deducted non-net profit of 26.0223 million yuan, an increase of 159.76% year-on-year; In the third quarter of 2024, the company's single-quarter main revenue was 88.8896 million yuan, a year-on-year increase of 120.32%; The net profit attributable to the parent company in a single quarter was 22.7239 million yuan, an increase of 229.81% year-on-year; The non-net profit deducted in a single quarter was 22.1284 million yuan, an increase of 223.78% year-on-year; The debt ratio was 7.42%, the investment income was 450,600 yuan, the financial expenses were -12.6244 million yuan, and the gross profit margin was 32.63%.

A total of 5 institutions have rated the stock in the last 90 days, 4 have given a buy rating and 1 have an overweight rating. The average institutional price target over the last 90 days is 25.5.

Here's the detailed earnings forecast information:

Margin data shows that the stock has a net financing inflow of 49,299,700 in the past three months, with an increase in the financing balance, and a net outflow of 158,100 with a decrease in the balance of securities borrowing and lending.

The above content is compiled by Securities Star based on public information, generated by intelligent algorithms, and does not constitute investment advice.