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晶盛机电(300316) Zhejiang Jingsheng (JSG)’s net profit in 2022 surged 71% YoY to RMB2.9bn, in line with the pre-announced profit released in mid-Mar. Net profit in 4Q22 grew52% YoY to RMB915mn. As of end-2022, total backlog (as of Jun) reached RMB25.4bn (solar/semiconductor: 87%/13%). We estimate this offers good visibility over the coming 18 months. In the foreseeable future, we believe JSG will remain a key beneficiary of the tight supply of crucibles. We therefore revise up our earnings forecast in 2023E/24E both by 9%, due to higher revenue and margin assumptions on the materials segments. We raise our TP to RMB99, based on 33x 2023E P/E on the back of 33% earnings growth in 2023E. Longer term, import substitution through continuous breakthrough in semiconductorequipment, including SiC, will offer upside to our current estimates. Maintain BUY. Strong growth of materials segment. Revenue grew 78% YoY to RMB10.6bn in 2022. By segment, equipment revenue (solar + semiconductor) grew 70% YoY RMB8.47bn. Materials revenue (crucibles, diamond wire saw & sapphire) surged 2.7x YoY to RMB1.46bn, implying 4.5x YoY growth in 2H22. Materials gross margin sharply expanded by 14.5ppt YoY to 39% in 2022, which partially offset the 1.8ppt contraction of equipment segment (to 40.8%). Blended gross margin in 2022 was therefore largely stable at 39.6%. Operating expense largely under control. SG&A ratio dropped 0.7ppt YoY to 3.1% in 2022 while R&D expense ratio increased 1.6ppt YoY to 7.5% which we believe is essential given the continuous development of new technology. JSC recognized RMB538mn (+85% YoY) gains in 2022, which came mainly from government subsidies. Substantial increase in customers’ downpayment. As at Dec 2022, contract liabilities (an indicator of down-payment from customers) surged 91% YoY to RMB9.47bn. We believe this suggests strong bargaining power of JSG. Decline in operating cash flow should be temporary. Operating cash flow dropped 24% YoY to RMB1.3bn in 2022, due to large increase in inventory (up >RMB6bn YoY). That said, 75% of the total inventories as of end-2022(RMB12.3bn) belonged to goods in transit. We expect the cash flow to see improvement in 1H23E. Risks: 1) Slowdown in solar power capex; 2) lower-than-expected gross margin; (3) risk of semiconductor business expansion.
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（以下内容从招银国际《Raise estimates on strong materials segment》研报附件原文摘录）晶盛机电(300316) Zhejiang Jingsheng (JSG)’s net profit in 2022 surged 71% YoY to RMB2.9bn, in line with the pre-announced profit released in mid-Mar. Net profit in 4Q22 grew52% YoY to RMB915mn. As of end-2022, total backlog (as of Jun) reached RMB25.4bn (solar/semiconductor: 87%/13%). We estimate this offers good visibility over the coming 18 months. In the foreseeable future, we believe JSG will remain a key beneficiary of the tight supply of crucibles. We therefore revise up our earnings forecast in 2023E/24E both by 9%, due to higher revenue and margin assumptions on the materials segments. We raise our TP to RMB99, based on 33x 2023E P/E on the back of 33% earnings growth in 2023E. Longer term, import substitution through continuous breakthrough in semiconductorequipment, including SiC, will offer upside to our current estimates. Maintain BUY. Strong growth of materials segment. Revenue grew 78% YoY to RMB10.6bn in 2022. By segment, equipment revenue (solar + semiconductor) grew 70% YoY RMB8.47bn. Materials revenue (crucibles, diamond wire saw & sapphire) surged 2.7x YoY to RMB1.46bn, implying 4.5x YoY growth in 2H22. Materials gross margin sharply expanded by 14.5ppt YoY to 39% in 2022, which partially offset the 1.8ppt contraction of equipment segment (to 40.8%). Blended gross margin in 2022 was therefore largely stable at 39.6%. Operating expense largely under control. SG&A ratio dropped 0.7ppt YoY to 3.1% in 2022 while R&D expense ratio increased 1.6ppt YoY to 7.5% which we believe is essential given the continuous development of new technology. JSC recognized RMB538mn (+85% YoY) gains in 2022, which came mainly from government subsidies. Substantial increase in customers’ downpayment. As at Dec 2022, contract liabilities (an indicator of down-payment from customers) surged 91% YoY to RMB9.47bn. We believe this suggests strong bargaining power of JSG. Decline in operating cash flow should be temporary. Operating cash flow dropped 24% YoY to RMB1.3bn in 2022, due to large increase in inventory (up >RMB6bn YoY). That said, 75% of the total inventories as of end-2022(RMB12.3bn) belonged to goods in transit. We expect the cash flow to see improvement in 1H23E. Risks: 1) Slowdown in solar power capex; 2) lower-than-expected gross margin; (3) risk of semiconductor business expansion.
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