2025-09-23 02:37Summary of SICC (688234.SS) Conference Call Company Overview - Company: SICC (688234.SS) - Market Cap: Rmb41.2 billion / $5.8 billion - Enterprise Value: Rmb39.0 billion / $5.5 billion - Industry: Greater China Technology, specifically in SiC (Silicon Carbide) substrates Key Points and Arguments Financial Performance - Share Price Increase: SICC's share price has increased by 68% year-to-date, outperforming the Shanghai-Shenzhen 300 Index which increased by 14% [1][10] - Target Price: The target price has been raised to Rmb111, implying a 29.2% upside from the current price of Rmb85.90, with an implied 101.2x 2026E PE based on 100% net income growth year-over-year in 2027E [1][40] Revenue and Earnings Forecast - Revenue Growth: Projected revenues are expected to grow from Rmb1,768.1 million in 2024 to Rmb4,625.7 million by 2027, reflecting a compound annual growth rate (CAGR) of 41.4% [3][13] - Net Income Growth: Anticipated net income growth of +81% CAGR from 2024 to 2027, driven primarily by the 8-inch SiC substrate [15][32] - Earnings Per Share (EPS): EPS is expected to increase from Rmb0.42 in 2024 to Rmb2.20 in 2027, with significant growth in 2026 [3][13] Capacity Expansion and Product Mix - Capacity Plans: SICC plans to increase annual capacity in China by 500k by 2027E and establish a new production site in Southeast Asia [7][27] - Product Mix Upgrade: The company is shifting towards 8-inch and larger substrates, with expectations that 8-inch revenues will contribute up to 90% by 2027, up from 25% in 2024 [7][34] - ASP Increase: The average selling price (ASP) of SiC substrates is projected to increase by 7% CAGR from 2024 to 2027, reaching US$698 [7][34] Market Position and Customer Base - Customer Penetration: SICC's substrates serve over half of the global top-10 power semiconductor device suppliers, with 48% of revenues coming from outside mainland China [7][15] - Market Share: Expected to increase global market share in conductive SiC substrates from 19% in 2024 to 24% by 2027 [15][34] Application Expansion - EV Adoption: SiC substrates are increasingly used in electric vehicles (EVs) for fast charging and improved power efficiency, with expectations that SiC adoption in EVs in China will rise to 50% by 2027 [21][22] - AI Data Centers: SiC is being adopted in AI data centers for power supply units, enhancing energy efficiency and power density [24][25] - AI Glasses: SiC substrates are also being utilized in AI glasses, contributing to a reduction in size and weight while improving display quality [26] Capital Expenditure (Capex) - Investment Plans: SICC has invested Rmb2.5 billion in Shanghai for 300k/year capacity of 6-inch SiC substrates and plans to invest an additional Rmb976 million to expand capacity for 8-inch and larger substrates by the end of 2027E [27][31] - Capex Ratio: The capex ratio is expected to normalize to 32% in 2024, with further expansions planned across China and Southeast Asia [31] Earnings Revision - Revised Projections: Net income estimates for 2026-27E have been raised by 14% and 43% respectively, reflecting better product mix and higher gross margins [32][38] - Revenue Adjustments: Revenue estimates for 2026E have been reduced by 8% due to pricing competition in the 6-inch SiC substrate market [33][38] Valuation Methodology - Target P/E: The valuation methodology has shifted to a long-term discounted P/E approach, with a target price of Rmb111 based on 2029E EPS [40][41] Additional Important Insights - Strong Execution: SICC has successfully transitioned from 6-inch to 8-inch substrates and is on track to launch 12-inch substrates, enhancing its competitive position [15] - Industry Dynamics: The competitive landscape is expected to improve due to industry consolidation and rising demand across various applications [33][34] This summary encapsulates the key insights from the conference call, highlighting SICC's growth trajectory, market positioning, and strategic initiatives in the SiC substrate industry.