SICC Co Ltd_ China BEST Conference Takeaways

Summary of SICC Co Ltd Conference Call Company and Industry Overview - Company: SICC Co Ltd (688234.SS) - Industry: Greater China Technology Semiconductors - Market Capitalization: Rmb21,030.1 million - Current Stock Price: Rmb48.94 (as of January 8, 2025) - Price Target: Rmb85.00, indicating a potential upside of 74% from the current price [1][1][1] Key Financial Metrics - Fiscal Year Ending: December - Projected EPS: - 2023: (0.18) Rmb - 2024: 0.49 Rmb - 2025: 0.70 Rmb - 2026: 0.87 Rmb [1][1][1] - Revenue Projections: - 2023: 1,251 million Rmb - 2024: 1,769 million Rmb - 2025: 2,194 million Rmb - 2026: 2,684 million Rmb [1][1][1] - EBITDA: - 2023: 131 million Rmb - 2024: 514 million Rmb - 2025: 705 million Rmb - 2026: 748 million Rmb [1][1][1] Industry Insights - SiC Substrate Pricing: The market average price for 6-inch SiC substrates has declined to Rmb3,000-3,500 in late 2024, with expectations of a further 5-10% year-over-year decline in 2025 [4][4][4] - Revenue Contribution: 8-inch SiC substrates contributed 20% of total revenue during the first three quarters of 2024, with major clients primarily from Europe and Japan [4][4][4] - Customer Base: Approximately 40% of revenue comes from global customers, while 60% is from China. Global customers are transitioning to 8-inch substrates faster than Chinese customers [4][4][4] - Future Capacity: The company has a total capacity of 400-500k wafers per year (in 6-inch) and plans to migrate its 6-inch capacity to 8-inch to increase output without significant capital expenditure in 2025 [4][4][4] Strategic Developments - Dual Listing Proposal: The company is pursuing a dual listing in Hong Kong to support further investments in 8-inch substrate production, indicating a strategic shift away from 6-inch investments [4][4][4] Valuation and Risks - Valuation Methodology: Assumes a 7.9% cost of equity, a medium-term growth rate of 22.5%, and a terminal growth rate of 7.5% [5][5][5] - Risks to Upside: - Lower-than-expected SiC substrate pricing erosion - More qualifications and long-term agreements from global Integrated Device Manufacturers (IDMs) - Faster market share gains over peers [7][7][7] - Risks to Downside: - Higher-than-expected SiC substrate pricing erosion - Fewer qualifications and long-term agreements from global IDMs - Slower market share gains over peers [7][7][7] Conclusion SICC Co Ltd is positioned for growth in the semiconductor industry, particularly in SiC substrates, with a strategic focus on expanding its 8-inch production capabilities. The financial outlook is positive, with significant revenue growth projected in the coming years, although risks related to pricing and market share dynamics remain.