Minsheng Securities·2024-02-02 16:00Investment Rating - The report gives a "Buy" rating for the company, indicating a positive outlook for its future performance [1]. Core Views - The company is a leading global foundry and the only advanced process foundry in China, with a strong market position and growth potential as the semiconductor industry recovers from a downturn [1][2]. - The report highlights the expected recovery in demand for semiconductors, particularly in consumer electronics, which will likely lead to an increase in the company's capacity utilization [1][2]. - The company has a robust expansion plan, with significant capital expenditures aimed at increasing its production capacity in the coming years [1][2]. Summary by Sections Company Overview - The company ranks fourth globally in pure foundry sales in 2022 and first among mainland Chinese companies, with no actual controller and China Information Communication Technologies Group as the largest shareholder with 14.97% [1][12]. - The company has been operational for over 20 years, providing a wide range of foundry services across various technology nodes from 0.35μm to 14nm FinFET [1][7]. Industry Dynamics - The foundry industry is experiencing rapid growth, particularly in mainland China, which has seen its foundry market sales increase from 32.7 billion yuan in 2016 to an estimated 90.3 billion yuan in 2023, with a compound annual growth rate (CAGR) of 15.71% [1][49]. - The global foundry market is also expanding, with sales expected to reach 140 billion USD in 2023, driven by increasing demand for semiconductors [49]. Financial Performance - The company's revenue for the first three quarters of 2023 was 33.098 billion yuan, a year-over-year decrease of 12.35%, while net profit attributable to shareholders was 3.675 billion yuan, down 60.86% year-over-year [1][16]. - The report forecasts revenues of 44.564 billion yuan, 52.259 billion yuan, and 62.354 billion yuan for 2023, 2024, and 2025 respectively, with corresponding net profits of 4.806 billion yuan, 6.023 billion yuan, and 7.444 billion yuan [2][16]. Capacity Expansion and Technology - The company is the first in mainland China to achieve mass production of 14nm FinFET technology and is expanding its production capacity with four new projects expected to add 340,000 pieces per month of 12-inch wafer capacity [1][10]. - The company has maintained a high level of R&D investment, with R&D expenses exceeding 4.953 billion yuan in 2022, representing 10% of its revenue [29][32]. Market Position and Competitive Advantage - The company is positioned as a leader in advanced process technology in mainland China, with a focus on meeting the growing demand from AI and IoT applications [1][32]. - The report emphasizes the importance of domestic production capabilities in the semiconductor industry, particularly in light of global supply chain challenges [46][54].