Matters:

The company announced the 2024 annual performance forecast, which is expected to achieve operating income of 175,000 yuan to 185,000 yuan in 2024, a year-on-year increase of 39.92% to 47.92%, and is expected to achieve a net profit attributable to the owners of the parent company of 170 million yuan to 205 million yuan, an increase of 215.7205 million yuan to 250.7205 million yuan compared with the same period last year, an increase of 471.82% year-on-year to 548.38%.

Ping An's view:

Operating income and product gross profit have increased significantly, and the company will turn losses into profits: the company expects to achieve operating income of 1.75 billion to 1.85 billion yuan in 2024, a year-on-year increase of 39.92% to 47.92%; It is estimated that the net profit attributable to the parent company will be 170 million to 205 million yuan, an increase of 216 million yuan to 251 million yuan (-45.7205 million yuan in the same period of last year), and the net profit after deducting non-attributable to the parent company will be 144 million to 179 million yuan, an increase of 257 million yuan to 292 million yuan compared with the same period last year.

In the single quarter of 2024Q4, the company is expected to achieve operating income of 469 million ~ 569 million yuan, a year-on-year increase of 10.09% ~ 33.57% and a month-on-month increase of 27.1% ~ 54.2%; The net profit attributable to the parent company was 0.27~62 million yuan, a year-on-year increase of 17.39%~169.57%, and a month-on-month increase of -34.15%~+51.22%. In 2024, the company's capacity utilization rate will gradually increase, the production and sales of products will continue to grow, the scale effect will gradually appear, the cost will be gradually optimized, and the high-quality conductive silicon carbide substrate products will accelerate the "going to sea". Operating income and gross profit of products increased significantly compared with the same period last year.

Forward-looking layout to create differentiation, the first 12-inch silicon carbide substrate: In the first half of 2024, the company's Shanghai Lingang plant has been able to reach the large-scale mass production capacity of 300,000 conductive substrates per year.

The company has formulated a strategic plan and will continue to steadily promote the second phase of production capacity increase at the Lingang plant.

At the same time, Tianyue Advanced announced through its WeChat public account that it released the industry's first 300mm (12 inches) silicon carbide substrate product at the 2024 Munich Semiconductor Exhibition in Germany on November 13, 2024, announcing that it has officially entered a new era of super-large silicon carbide substrates. With the rapid development of new energy vehicles, clean energy such as photovoltaic energy storage, 5G communication and high-voltage smart grid, the demand for silicon carbide-based devices that meet the working conditions of high power, high voltage and high frequency has also grown by breakthroughs. The 300mm silicon carbide substrate material can further expand the area that can be used for chip manufacturing on a single wafer, and greatly increase the output of qualified chips. Under the same production conditions, the output can be significantly increased, the unit cost will be reduced, and the economic benefits will be further improved, which will provide the possibility for the larger-scale application of silicon carbide materials. Tianyue Advanced said that by adding 300mm silicon carbide substrate products, it has created more differentiated product series, and met the diversified needs of customers in terms of product quality and performance. The advent of this product reflects the company's continuous investment in technological innovation and product upgrades, and at the same time is a forward-looking layout for future market trends. In addition, in order to accelerate the company's internationalization strategy and overseas business layout, enhance the company's overseas financing capabilities, and further improve the company's capital strength and comprehensive competitiveness, according to the company's overall development strategy and operational needs, the company intends to issue shares (H shares) overseas and list on the Hong Kong Stock Exchange.

Investment suggestion: With the continuous penetration of silicon carbide semiconductor materials in new energy vehicles and wind and solar energy storage and other application fields, the downstream application market continues to expand, and the terminal demand for high-quality, vehicle-grade products is strong. The company's conductive product production capacity and output continue to increase, product delivery capacity continues to increase, with the increase in the utilization rate of new production capacity, the expansion of production capacity scale, and the improvement of profitability. Combined with the judgment of the development trend of the industry, we have lowered the company's profit forecast, and it is expected that the company's net profit in 2024-2026 will be 197 million/324 million/415 million yuan respectively (the previous value is 2.21/3.64/565 million yuan), the corresponding EPS is 0.46/0.75/0.97 yuan, and the PE corresponding to the closing price on January 24 is 117.1X, 71.2X and 55.5X, we are optimistic about the continued strong demand for silicon carbide substrates in the downstream industry, as well as the company's leading position in the field of silicon carbide substrates, and maintain the company's "recommended" rating.

Risk Warning: (1) The risk of relying on foreign suppliers for some raw materials and processing and testing equipment. In the future, if the country or region where the foreign supplier is located implements restrictive trade policies, the company will not be able to obtain the necessary raw materials or equipment, which will have a negative impact on the company's production and operation. (2) There is a risk that changes in national industrial policies will have a greater impact on the company's operation. If the state reduces its support for the wide bandgap semiconductor industry, or the state introduces further restrictive industrial policies or window guidance and other measures, or the company's proposed investment projects are included in the scope of regulatory regulation of the restrictive industrial policy, it will have an adverse impact on the company's operation, sustainable profitability and growth. (3) The high cost of silicon carbide substrate restricts the risk of downstream application development. In the short term, the yield of silicon carbide substrates is generally not high, which brings certain difficulties to cost reduction, resulting in the penetration rate of silicon carbide devices is lower than expected, which may have an adverse impact on the company's operation.